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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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May 30, 2014

Chamber Resorts to Cartoonish Analogies to Defend Corporations’ ‘Right’ to Attack Policies

What do you do when you lose an argument on the basis of, you know, facts?  

You use fantastical analogies to substantiate your battered claims.  At least, that appears to be the game plan of the U.S. Chamber of Commerce. 

In a blog post yesterday, the corporate conglomerate tried once again to defend a system that empowers foreign corporations to bypass our courts, go before three private lawyers unaccountable to any electorate, and demand that the U.S. Treasury hand over our tax dollars for policies ranging from Wall Street reforms to climate change initiatives.  “Trade” deals currently under negotiation, such as the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA), would vastly expand this extraordinary “investor-state” system. 

How did the Chamber address widespread concerns over the proposed empowerment of tens of thousands of foreign corporations to have a go at our domestic laws?  By comparing them to childhood fears of a monster in the closet. 

(See, there are no monsters in your closet.  By the rule of analogies, there is therefore no problem with enabling corporations to more easily attack our health and environmental protections.  Got it?)  

The Chamber’s post concludes with this kicker: “The next time someone comes peddling fear of ISDS [investor-state dispute settlement], ask this simple question: ‘Can you cite an ISDS case where the investor won but didn’t deserve compensation?’ Expect to hear silence in return.” 

“Silence” is a creative way to characterize academics’ and advocates’ years of detailed analysis of case after case in which corporations have extracted taxpayer compensation for public interest policies.  On the basis of such cases, voices ranging from former NYC mayor Michael Bloomberg to the National Council of State Legislatures to the CATO Institute to thousands of concerned citizens have warned of the threats that expansion of the extreme investor-state regime via the TPP and TAFTA would pose to public health, a clean environment, rule of law, and taxpayers’ wallets.  (Oh, and the nation’s largest labor, environmental, health, privacy, Internet freedom, financial, development, family farmer, faith and consumer groups have also spotlighted the record of investor-state damage.)  Chamber’s claim of “silence” is deaf to these warnings from across the political spectrum.

To answer Chamber’s question –- whether we can cite an “investor-state” case where a three-person tribunal unjustly ordered a government to pay a foreign corporation for a policy enacted in the public’s interest –- indeed, we can.  The main difficulty is choosing from the panoply of available cases

What about the case where a tribunal ordered Canadian taxpayers to pay millions to a waste treatment corporation for preventing the firm from exporting to Ohio a hazardous waste that the U.S. Environmental Protection Agency has found to be harmful to humans and toxic to the environment?

Or the one where an investor-state tribunal ordered Mexico to pay a corporation more than $16 million for not allowing the firm to build a toxic waste facility until it cleaned up existing toxic waste problems?

Or take the case that Occidental Petroleum won against Ecuador in 2012. The tribunal in that case acknowledged that the oil corporation had broken an Ecuadorian law governing oil exploration in the Amazon.  But then the tribunal concocted a new governmental obligation to Occidental, decided the government had violated this unwritten obligation despite adhering to Ecuadorian law, and ordered Ecuador’s taxpayers to hand $2.3 billion to the oil company.  One of the three lawyers in the tribunal dissented, describing the decision as “egregious.”  That didn’t remove the penalty imposed on Ecuador by her two colleagues. 

The Chamber tries to downplay the amounts that taxpayers have to shell out to foreign firms when governments lose investor-state cases, arguing that the corporations often get “a fraction” of what they ask for.  But when corporations ask for billions, a “fraction” is no chump change.  In the Occidental case, the $2.3 billion penalty imposed on Ecuador’s taxpayers is equivalent to the amount the government spends on health care each year for half the population. 

The Chamber’s post also tried to minimize the investor-state system’s costly legacy by wrongly stating that “governments comfortably win in the vast majority of [investor-state] cases.”  The U.N. Conference on Trade and Development (UNCTAD) reports that in 57 percent of all public, concluded investor-state cases, the government has either lost the case to the investor or has been pushed to settle with the investor, typically resulting in the extraction of millions of taxpayer dollars and/or the overturning of the policy that the corporation challenged.  In recent cases, governments have been outright losing most of the time.  In seven out of eight public decisions handed down by investor-state tribunals last year, the government lost.  That’s hardly a “comfortable” record.

And those are only the cases that have already been decided.  Investor-state claims have surged in recent years, resulting in pending cases that target everything from Australia’s anti-smoking policies to Germany’s decision to phase out nuclear power after the Fukushima nuclear disaster.  While the Chamber tries to claim that “relatively few” cases have been launched in the “nearly half a century” of the investor-state regime, that argument requires closing one’s eyes to the recent wave of cases.  While no more than 15 cases were launched in any given year in the first four decades of the “nearly half a century” of investor-state treaties, more than 50 cases have been launched in each of the last three years.  Pending cases include:

  • Chevron v. Ecuador: in response to Chevron’s attempt to evade a $9.5 billion domestic ruling for Amazon pollution, an investor-state tribunal has directed Ecuador’s government to violate its Constitution, has cast aside two decades of court rulings, and has declared that rights granted to Ecuadorians no longer exist.
  • Eli Lilly v. Canada: a U.S. pharmaceutical corporation has challenged Canada’s legal standard for patents and pushed for greater monopoly patent protections, which increase the cost of medicines for consumers and governments. 
  • Renco v. Peru: a U.S. corporation has tried to evade its contractual commitment to clean up its metal smelter contamination in one of the world’s most polluted towns.

The flood of recent investor-state attacks on domestic safeguards owes largely to the fact that tribunals are interpreting ever more broadly the vague investor-state “rights” granted to foreign corporations.  Contrary to the Chamber’s assertions, these rights extend beyond those afforded to domestic firms.  Under U.S. law, a coal corporation, for example, could not invoke a right to government compensation for new carbon emissions controls –- such as those the administration plans to roll out on Monday –- on the basis that the new policy frustrated the firm’s “expectations.”  But investor-state tribunals have repeatedly decided that foreign firms, under investor-state pacts, indeed enjoy a “right” to a static regulatory framework that does not thwart their expectations.  

And of course, if a U.S. firm takes issue with a new U.S. environmental or financial or health regulation, the corporation cannot skirt the entire U.S. domestic legal system and take its case to a private three-person extrajudicial tribunal empowered to order the U.S. Treasury to compensate the firm, with limited option for appeal.  But that is precisely the privilege granted to foreign corporations under the investor-state system’s extraordinary terms. 

Comparing this system to fictitious beasts inhabiting one’s closet will not make it go away.  To highlight the dangers posed by this regime and its proposed expansion via the TPP and TAFTA, we need not resort to far-fetched analogies.  The damage already wrought will suffice. 

May 22, 2014

WTO Final Ruling: European Ban on Products from Inhumane Seal Harvest Violates WTO Rules

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

The WTO today added fuzzy white baby seals clubbed to death on bloody ice flows to dolphins and sea turtles as animals that the WTO has declared cannot be protected by domestic laws because they  violate “trade” rules, which will just fuel public and policymaker skepticism about these so-called trade deals. 

As a technical matter, today’s ruling confirms the uselessness of the WTO exceptions, allegedly designed to protect countries’ domestic public interest laws, that are now being touted as the way to safeguard environmental, health and safety policies in proposed pacts such as the Trans-Pacific Partnership (TPP). This is the 39th time out of 40 attempted uses that the exception has been rejected by WTO tribunals when raised to safeguard a domestic public interest law.

BACKGROUND: In this final ruling, the WTO Appellate Body acknowledged that the European Union’s ban on the importation and sale of seal products resulted from concerns about “inhumane” hunts with “inherent animal welfare risks,” but concluded the EU failed to satisfy the litany of conditions required to defend public interest policies under the WTO’s “general exception” provisions. Specifically, the Appellate Body ruled against use of the WTO exception for policies “necessary” to protect public morals. Only one out of 40 government attempts to use the the WTO General Exceptionse, found in Article XX of the WTO’s General Agreement on Tariffs and Trade (GATT) and Article XIV of the General Agreement on Trade in Services (GATS), has ever succeeded.

In its ruling today, the Appellate Body also rebuffed arguments made by the U.S. government as a third party observer to the case demanding that the WTO evaluate whether policies that appear to have a discriminatory effect stem from a “legitimate regulatory distinction.” The Appellate Body ruled against this U.S. government position, concluding that WTO panels do not need to consider under GATT whether a challenged domestic policy stems from a legitimate policy objective.

Today’s ruling follows a string of WTO rulings against popular U.S. environmental and consumer policies. In May 2012, for example, the WTO ruled against voluntary “dolphin-safe” tuna labels that, by allowing consumers to choose to buy tuna caught without dolphin-killing fishing practices, have helped to dramatically reduce dolphin deaths. Today’s decision will again spur public ire over WTO rules that extend beyond “trade” to target domestic environmental and consumer safeguards.

May 19, 2014

On Eve of ‘Check In’ Ministerial, Top 10 Signs That Obama Administration Should Call It Quits on TPP Negotiations

Twenty-one Multilateral TPP Meetings Since ‘Final’ August 2013 Brunei Negotiating Round, All Without Even a Facade of Stakeholder Input Process 

The office of the U.S. Trade Representative (USTR) worked to spin down expectations for a May 19-20 ministerial-level meeting on the Trans-Pacific Partnership (TPP) even before last week’s TPP chief negotiators meeting in Vietnam that failed to resolve deadlocks on the myriad outstanding TPP issues.

While 600 official U.S. trade advisors, mainly comprised of corporate representatives, have continued to obtain information and give input on TPP negotiations, the last opportunity for official “stakeholder” input into the TPP took place August 24–31, 2013, during the 19th round of negotiations in Brunei. However, heads of state, negotiators and ministers have continued to meet in an attempt to finalize a TPP. Without even the pretense of providing opportunities for civil society to engage in the process, in the past nine months, TPP countries have had at least one heads-of-state summit, two ministerials, four meetings of chief negotiators, 14 so-called “intersessionals,” four Obama bilateral heads of state meetings and endless U.S.-Japan bilateral negotiations and ministerials. And these are only the meetings that have been reported.

Meanwhile, the U.S. government continues to use large sums of taxpayer money to push negotiations to obtain a TPP agenda favored by corporate interests that remains stalled in the face of growing opposition in the United States and throughout TPP countries. The U.S. government was the official host of the Vietnam meeting this week and will be the official host of the upcoming ministerial meeting in Singapore.

Following are the top 10 indicators of why the USTR has decided to tamp down expectations once again for a negotiation that has supposedly been in an “end game” since last year:

1)     U.S. and Japanese officials have offered conflicting versions of the outcomes of their bilateral “breakthrough”-but-not-a-deal non-deal from Obama’s Japan visit when briefing their TPP colleagues. Indeed, Japan was among the countries arguing that the state of U.S.-Japan market access negotiations was not sufficiently advanced to merit another TPP ministerial meeting.

2)     An LDP bloc in Japan’s Diet adopted another resolution last week, while TPP chief negotiators met in Vietnam, reiterating the ruling party’s requirement that the TPP must protect a list of “sacred” agricultural commodities. The Japanese parliamentary action by Prime Minister Shinzo Abe’s own political party, making clear it will not support a TPP that zeroes out agricultural tariffs, is seen as a direct response to U.S. congressional and agribusiness statements that only a TPP that does so is politically acceptable.

3)     Vietnam’s former trade minister, who is a current senior advisor on TPP negotiations, recently declared that Vietnam would not accept a TPP requirement that workers be allowed to establish independent labor unions.Former MinisterTruong Dinh Tuyen said Vietnam instead would accept a compromise that devolved some power to local unions.

4)     U.S. trade officials announced that Japan would advance market access talks with other TPP nations at the Vietnam lead negotiators meeting and that this was a sign of a new stage in negotiations – except that is not what Japan intended or did. Other countries are unlikely to even consider high-stakes tradeoffs relating to U.S. demands that could raise drug prices, extend the scope of investor-state dispute liability, limit financial regulation, discipline state-owned enterprises, and enforce labor and environmental standards without knowing what prospective market access opportunities might be forthcoming.

5)     On May 1, the Sultan of Brunei implemented a new Sharia-law-based penal code that calls for jail terms for the wearing of immodest clothing, pregnancies outside marriage and abortion, with death by stoning for adulterers, gays and lesbians to be phased in later. The move prompted new U.S. constituencies to join the anti-TPP effort.

6)     The USTR’s concern that the optics of not having a TPP ministerial when all of the countries’ trade ministers are together for a pre-scheduled APEC meeting overcomes opposition by other TPP nations to meeting when there is nothing ready for ministers to decide. Thus, the announcement of a “check-in” ministerial, which ministers from at least three TPP nations do not plan to attend.

7)     Japanese officials or press are creating a series of red herring stories. Reports of near-deals on intellectual property, new U.S. proposals and more do not relate to what happened on the ground in Vietnam. Indeed, the Japanese press has run a series of follow-up stories speculating about who is generating the misdirects and why. There is no indication that key areas of controversy that existed in previous ministerials in the areas of intellectual property, investment, environment, labor, state-owned enterprises and more are much closer to resolution, even after the expense of the past months of negotiations. The U.S. ambassador to Malaysia recently expressed hope that the deal might be concluded by 2017.

8)     The USTR continues to avoid raising currency issues at chiefs or ministerial levels, even though it is increasingly clear that a TPP without enforceable currency rules is dead on arrival in the U.S. Congress. If negotiations were nearing a final deal, this issue would have to be raised; Congress’ outspoken position has made clear to the other TPP nations that either this issue will be raised in negotiations or it will be raised later as an additional demand after ‘final’ concessions have been made, as was seen in the Korea Free Trade Agreement renegotiation four years after signing.

9)     The prospect of passage of any form of trade authority in 2014 is dimming. Indeed, some congressional Fast Track proponents are already talking about the prospect that President Barack Obama may never obtain trade authority, so they are setting their sights on 2017.As the other TPP countries recognize the lack of congressional support for Fast Track and TPP, their willingness to make U.S.-negotiator-demanded concessions on issues with high political costs at home also dims.

10)  In April, Chile’s Trade Ministry under recently elected President Michelle Bachelet confirmed that it is conducting a comprehensive review of the scope of the TPP and what its impact could be for Chile, noting that it is initiating a process of transparency and openness in the negotiations to include civil society input into their review. The website states, “We consider that there are many issues that are still open, the negotiation still has a ways to go.”

For more information about the TPP, please visit http://citizen.org/tpp

May 15, 2014

Second Anniversary of Colombia Pact Spotlights Administration's Failed Promise of Labor Rights Improvements, Now Recycled to Defend TPP Negotiations with Vietnam amid Worker Riots

Today, as foreign-owned factories in Vietnam lie smoldering after protesting Vietnamese workers burnt them to the ground, Obama administration officials are in Vietnam negotiating a Trans-Pacific Partnership (TPP) pact that would place U.S. workers in direct competition with their Vietnamese counterparts. 

While politics provided the spark for Vietnam’s recent worker riots, the country’s notorious working conditions fanned the flames.  According to the U.S. government, the International Labour Organization, and workers' rights groups, those conditions include “children working nine to 12 hours per day for low pay in hazardous working conditions,” forced labor, discrimination against pregnant women, blocked fire exits, prohibition of independent unions, and minimum wages dwarfed by those paid in China.

Members of Congress, U.S. labor unions and human rights groups have made clear that the U.S. government should not be contemplating a pact with a country where workers’ rights are systematically violated. 

That same argument motivated widespread opposition to the U.S.- Colombia “free trade” agreement (FTA), which took effect two years ago today. 

The Colombia pact was implemented despite warnings from Congress and labor groups that U.S. workers should not be pitted against workers in a country consistently listed as the world’s most dangerous place to be a unionist.  The Obama administration helped push the FTA through the U.S. Congress over record Democratic opposition with promises that the gross workers’ rights violations in Colombia would wane under the FTA.  The administration declared that a Labor Action Plan (LAP) signed with Colombia in 2011 as a fig leaf for the FTA would “lead to greatly enhanced labor rights in Colombia.”

After two years of FTA implementation, that promise rings hollow as Colombia’s unionists face persistent murders, death threats, and repression. 

Now, in response to growing opposition to the notion of a TPP pact with Vietnam, the Obama administration is conjuring up the same failed promise, asserting that working conditions in Vietnam will improve under the pact. 

Members of Congress are not likely to buy the recycled pitch, as the two-year anniversary of the Colombia FTA spotlights the harrowing violence still faced by Colombia’s union workers. Colombia’s National Union School, recognized by the LAP as an authoritative source of monitoring data, reports that:

  • In the three years since the LAP was unveiled, 73 Colombian unionists have been murdered.  There were four more unionist murders in 2013 than in 2012.
  • Colombia’s union workers have endured 31 murder attempts and 953 death threats since the LAP was announced.  These crimes have not resulted in any captures, trials, or convictions.
  • More than 3,000 unionists have been murdered in Colombia since 1977. The overall impunity rate for these murders is 87%.
  • Since 1977, Colombian unionists have received 6,262 recorded death threats.  Only 4 of these threats have been punished, meaning that impunity for anti-union death threats stands at 99.9%.

Undeterred by the ongoing repression of Colombian workers, U.S. trade negotiators are in Vietnam at this very moment in attempt to negotiate via the TPP an expansion of the FTA model to Vietnam, despite the country’s widespread labor abuses.  Under the TPP, U.S. workers would be placed into direct competition with Vietnamese workers facing these on-the-ground realities:

  • Child labor:  According to the Vietnam government’s own estimates, more than 25,000 Vietnamese children work in hazardous conditions.  The U.S. State Department reports that Vietnam government inspectors have found “children working nine to 12 hours per day for low pay in hazardous working conditions (including poor lighting, dusty environments, and the operation of heavy machinery)…”
  • Forced labor:  Individuals detained, but not convicted, for drug offenses are required to work for little to no pay in government detention centers as part of their “treatment,” according Human Rights Watch and the State Department.  Vietnam is one of just four countries in the world cited by the U.S. Department of Labor for using both forced labor and child labor in apparel production.
  • Low wages:  Vietnam’s average minimum wage is 52 cents per hour.  That’s a fraction of minimum wages even in China.  And it’s one-fourteenth of the earnings of U.S. minimum wage workers who would be pitted against their Vietnamese counterparts. 
  • Unsafe working conditions:  The International Labour Organization reports that even after inspecting Vietnamese garment factories on three occasions for fire hazards, 41% of the inspected factories still had inaccessible or blocked fire exits. 
  • Violations of women’s rights:  Vietnamese factories have employed several discriminatory methods to try to avoid the legal obligation to provide paid maternity leave to pregnant workers. Last year the Vietnamese press revealed that one factory required female workers to sign a contract vowing not to get pregnant for their first three years of employment. 
  • Union repression:  Vietnam bans independent unions.  Workers wishing to organize for their rights must affiliate their union with the Vietnam General Confederation of Labor, a self-described “member of the political system under the leadership of the Communist Party of Vietnam.”  The Worker Rights Consortium reports that Vietnamese workers attempting to form independent unions have been “subjected to sustained campaigns of prosecution and imprisonment.” 

In the face of such entrenched labor abuses, it is incredible that the administration is trotting out the same message used for the Colombia FTA: “Don’t worry –- workers’ conditions will improve once the FTA is in place.”  After two years of the Colombia deal, Colombia’s workers sadly beg to differ.  

May 09, 2014

Release of Two Years of Korea FTA Data Throws More Cold Water on Obama TPP and Fast Track Efforts After Asia Trip Fails to Change Dynamic

U.S. Exports to Korea Down 5 Percent, Imports from Korea Up and Trade Deficit With Korea Swells 50 Percent, Contradicting Obama Claims of U.S. Export and Job Growth

The just-released official  U.S. government trade data covering the first two years of the U.S.-Korea “free trade” agreement (FTA) further chills the prospects for the Trans-Pacific Partnership (TPP) and Fast Track trade authority. Today’s release of the U.S. International Trade Commission (USITC) data likely will intensify congressional antipathy toward Fast Track and concerns about the TPP. The USITC data, corrected to remove re-exports not produced in the United States, show falling U.S. exports to Korea and a ballooning U.S. trade deficit under the Korea FTA, which served as the U.S. template for the TPP.

U.S. goods exports to Korea have dropped 5 percent  under the Korea FTA’s first two years, compared to the two years before FTA implementation, in contrast to the Obama administration’s promise that the Korea FTA would mean “more exports, more jobs” and recent claims that the agreement has shown “strong results.” Imports into the United States from Korea have climbed 8 percent under the FTA (an increase of $4.7 billion per year).

From the year before the FTA took effect to its second year of implementation, the U.S. goods trade deficit with Korea swelled 50 percent (a $7.6 billion increase). In 23 out of 24 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly level seen in the two years before the deal. The trade deficit increase under the FTA indicates the loss of more than 50,000 U.S. jobs, according the trade-jobs ratio that the Obama administration used to project gains from the deal. 

“The fact that the Korea deal has resulted in a worse trade deficit and more lost jobs has had a very chilling effect on public and congressional support for the TPP and Fast Track, and the Obama administration’s dishonest claims that the pact has expanded exports has only hardened that opposition,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “While most Democrats and a sizeable bloc of Republicans in Congress have already voiced opposition to Fast Tracking the TPP, both the negative outcomes of the Korea FTA and the administration’s dishonest claim that the pact is a success are adding more converts daily.” 

Rather than acknowledge that the Korea pact has resulted in declining U.S. exports and a larger trade deficit, the administration’s Office of the U.S. Trade Representative (USTR) has relied on data omissions and distortions in press materials that attempt to paint failure as success. For a full response to the USTR’s litany of data errors, visit http://www.citizen.org/documents/Korea-FTA-USTR-data-debunk.pdf

The USTR’s biggest distortion is counting foreign-made products that are simply shipped through the United States en route to Korea as “U.S. exports” to Korea. Rather than use the official U.S. government trade data provided by the USITC that counts only U.S.-made exports, USTR cites data that treat the 14 percent rise in foreign-made exports to Korea under the FTA as a boost to U.S. exports, artificially diminishing the dramatic U.S. export downfall.

The USTR relies on a series of other data errors in attempt to hide the dismal Korea FTA record, including:

  • Failing to account for inflation: By treating a rise in prices as a rise in exports, the USTR mistakenly claims that the observed decrease in U.S. exports to Korea in manufactured goods under the FTA is an increase.
  • Ignoring aggregate losses to cherry-pick tiny winning sectors: TheUSTR does not mention the overall 34 percent downfall in U.S. agricultural exports to Korea under the FTA’s first two years. Instead, the USTR boasts export increases in products like fruit and wine. The combined annual export gains in fruit and wine amount to $69 million, less than 6 percent of the more than $1.2 billion aggregate annual export loss in agricultural products.
  • Using a selective timeframe: The USTR’s assessment of the Korea FTA record ignores 12 months of available data under the FTA and fails to include in the pre-FTA baseline of comparison the three months of data immediately prior to the deal’s implementation. This selective timeframe, combined with the decision to incorporate foreign-made exports, allows the USTR to claim that the U.S. export downfall under the FTA is entirely because of diminished exports in corn and fossil fuels. But even after discounting both corn and fossil fuels, the full set of data shows that U.S. exports to Korea have still fallen under the FTA, and the U.S. trade deficit with Korea has still ballooned.

“The USTR’s resort to major data deceptions to try to play down the debacle of the Korea FTA indicates just how desperate the administration is to shake the mounting evidence that the FTA model it now seeks to expand with the TPP costs U.S. jobs,” said Wallach. “But using data tricks to try to cover up the failure of the largest Obama trade deal, like treating foreign-made products as U.S. exports, is likely to backfire, and members of Congress do not take kindly to deception.”

The decline in U.S. exports to Korea under the FTA’s first two years was broad-based; of the 15 U.S. sectors that export the most to Korea, nine of them have experienced export declines under the FTA. Export shifts under the FTA have been larger for losing sectors than for winning sectors. Of the 15 top export sectors, eight have seen declines in exports to Korea of greater than 5 percent while only three have seen growth of exports to Korea of greater than 5 percent.

Many of the sectors that the administration promised would be the biggest beneficiaries of the FTA have been among the largest losers, including U.S. meat producers. U.S. poultry exports to Korea have plummeted 31 percent under the FTA, while U.S. beef and pork exports have fallen 10 and 19 percent respectively. 

The U.S. automotive industry, another promised winner under the deal, has endured a surge in automotive imports from Korea that has swamped a marginal increase in U.S. automotive exports to Korea since the FTA took effect. While U.S. average annual automotive exports to Korea under the pact have been $294 million higher than before the deal, average annual automotive imports from Korea have soared by $4.9 billion under the deal, spurring a 32 percent increase in the U.S. automotive trade deficit with Korea.

Overall, U.S. export growth to countries with pacts like the Korea FTA has been particularly lackluster. Growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to FTA partners by 30 percent over the past decade.

For further analysis of the outcomes of the Korea FTA’s first two years, visit http://www.citizen.org/documents/Korea-FTA-USTR-data-debunk.pdf.  

May 01, 2014

Froman Takes Heat from Senators for a TPP that Does Not Promote "Our Values"

“Done right, trade policy promotes not only our interests, but also our values.”  Those were the words of U.S. Trade Representative Michael Froman in his testimony today before the Senate Finance Committee. Froman proceeded to defend the Trans-Pacific Partnership (TPP) – the sweeping deal mired in deadline-missing negotiations with 11 countries – as trade policy “done right.”

If the TPP promotes our values, what does that say about our values?  Do we value the ability of pharmaceutical corporations to reap monopoly profits during extended patent periods over the ability of cancer and HIV patients to access affordable medicines?  Do we value the ability of banks to engage in high-risk trading over the financial stability of a nation?  Such threats are manifest in the leaked texts of the TPP. 

Or what about the Obama administration's oft-touted value of transparency?  The administration has kept TPP texts under a remarkable degree of secrecy, providing limited access to members of Congress and zero access to the U.S. public, despite repeated congressional calls for transparency. When Senator Wyden (D-Ore.) specifically asked Froman if he would release a copy of the TPP text before President Obama signed and sealed the deal, Froman refused to answer.

Another instance of congressional defiance arose when Senator Schumer (D-N.Y.) asked Froman whether the administration's TPP negotiators have complied with the demand expressed by a majority of both houses of Congress to include currency manipulation disciplines in the deal.  Froman admitted that they have not.

Senators at the hearing called out Froman for such non-compliance and openly cast doubt on the notion that the TPP could gain congressional approval.

At one point in the hearing, Senator Thune (R-S.D.) asked whether there was a risk that the U.S. government could be challenged under the North American Free Trade Agreement (NAFTA) for not approving the highly-controversial proposed Keystone XL pipeline. Such a challenge is possible under the extraordinary provisions in NAFTA, slated for expansion in the TPP, that empower foreign corporations to circumvent our domestic courts and directly challenge the U.S. government before extrajudicial tribunals over environmental and health policies.

Senator Thune’s question was not hypothetical. Yesterday the Canadian press reported that TransCanada – the Canadian corporation behind Keystone XL – may be considering using NAFTA’s foreign investor privileges to demand that the U.S. government provide compensation for delaying approval of the polemical pipeline. 

That’s right. TransCanada is reportedly contemplating using a “trade” pact to argue that U.S. taxpayers owe the corporation money because the Obama administration has not okayed a widely-opposed project that environmental groups project would increase carbon emissions and oil spills.

How could such a claim be substantiated?  Apparently TransCanada could argue that the pipeline delay violates its NAFTA-protected right to “fair and equitable treatment.”  On the basis of this same claim, tribunals have ordered governments to pay foreign firms hundreds of millions of dollars under NAFTA and related pacts for natural resource policies, environmental protections, and health and safety measures. TPP would expand these corporate privileges even further, empowering thousands more foreign firms to join TransCanada in contemplating extrajudicial attacks on public interest policies. 

Froman, of course, did not dwell on such threatening core provisions of the TPP.  What did he say about the pact?  Unsurprisingly, he recycled the tired pitch that the controversial deal would boost U.S. exports. He stated, “The Obama Administration has a strong record of success in promoting U.S. exports…” -- a claim ostensibly intended as a credit to the status quo trade policy that the TPP would expand. 

Actually, U.S. exports grew by zero percent in 2013, rendering virtually impossible Obama’s stated goal to double exports by the end of 2014. (At the export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054.) That’s hardly a success story upon which to promote a more-of-the-same TPP. 

But perhaps the dismal export record of late is due to exports to countries with which we don’t have a “free trade” agreement (FTA) not keeping up with exports to our FTA partners? 

Nope.  U.S. goods exports to our 20 FTA partners actually fell slightly from 2012 to 2013, while exports to the rest of the world increased slightly.  This greater export growth to non-FTA partners than to FTA partners is not an anomaly. Growth in U.S. goods exports to non-FTA partners has actually been 30 percent higher than growth in exports to FTA partners over the last decade. 

Froman particularly singled out agriculture and manufacturing as two sectors on whose behalf the administration is pushing the TPP and similar deals. On manufacturing, he stated:

In 2013, the United States exported nearly $1.4 trillion in manufactured goods, which accounted for 87 percent of all U.S. goods exports and 61 percent of U.S. total exports. To support the growth of manufacturing and associated high-quality jobs here at home, the Obama Administration will continue to pursue trade policies aimed at keeping American manufacturers competitive with their global peers.

Last year, the United States ran a trade deficit in manufactured goods with its 20 FTA partners that topped $52.4 billion.  This represented an 8 percent increase from the $48.7 billion manufacturing trade deficit with FTA partners in 2012.  In contrast, the U.S. manufacturing trade deficit with non-FTA countries declined by 3 percent from 2012 to 2013.  Supporting U.S. manufacturing requires rethinking status quo trade policies, not “continuing to pursue” them. 

On agriculture, Froman stated:

Agriculture is vital to the American economy. In 2013, U.S. farmers and ranchers exported a record $148.4 billion of food and agricultural goods to consumers around the world. In 2014, the Administration aims to help them build on that record performance.

The U.S. agricultural trade balance with U.S. FTA partners last year was a $7.7 billion deficit, which represented a doubling of the U.S. agricultural trade deficit with FTA partners from 2012.  That's hardly a “record performance” for the trade policy model that the TPP would expand.

Froman was right to say that trade policy can promote our values when “done right.” Based on the evidence, we must not be doing it right.

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