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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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October 20, 2014

World Trade Organization Rules Against Popular U.S. Country-of-Origin Meat Labels on Which Consumers Rely

Compliance Panel Says U.S. Policy Still Violates WTO Despite Changes Made to Comply With 2012 WTO Order; U.S. Should Not Change COOL Policy

Today’s ruling by a World Trade Organization (WTO) compliance panel against U.S. country-of-origin meat labeling (COOL) policies sets up a no-win dynamic, and the Obama administration should appeal the ruling, Public Citizen said.

If the administration were to weaken COOL, U.S. consumers would lose access to critical information about where their meat comes from at a time when consumer interest in such information is at an all-time high and opposition would only grow to the administration’s beleaguered trade agenda. If the administration again were to seek to comply with the WTO by strengthening COOL, then Mexico and Canada – the two countries that challenged the policy – likely would continue their case, even though cattle imports from Canada have increased since the 2013 strengthening of the policy. 

The ruling further complicates the Obama administration’s stalled efforts to obtain Fast Track trade authority for two major agreements, the Trans-Pacific Partnership and the Trans-Atlantic Free Trade Agreement. Both of these pacts would expose the United States to more such challenges against U.S. consumer, environmental and other policies.

“Many Americans will be shocked that the WTO can order our government to deny U.S. consumers the basic information about where their food comes from and that if the information policy is not gutted, we could face millions in sanctions every year,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Today’s ruling spotlights how these so called ‘trade’ deals are packed with non-trade provisions that threaten our most basic rights, such as even knowing the source and safety of what’s on our dinner plate.”

The WTO compliance panel decided that changes made in May 2013 to the original U.S. COOL policy in an effort to make it comply with a 2012 WTO ruling against the law are not acceptable and that the modified U.S. COOL policy still constitutes a “technical barrier to trade.” The panel decided that the strengthened COOL policy afforded less favorable treatment to cattle and hog imports from Canada and Mexico, despite a 52 percent increase in U.S. imports of cattle from Canada under the modified policy. The panel stated that the alleged difference in treatment did not “stem exclusively from legitimate regulatory distinctions.”

The United States has one chance to appeal this decision before the WTO issues a final, binding ruling. Under WTO rules, if the U.S. appeal fails, Canada and Mexico would be authorized to impose indefinite trade sanctions against the United States unless or until the U.S. government changes or eliminates the popular labeling policy.

Today’s ruling follows a string of recent WTO rulings against popular U.S. consumer and environmental policies. In May 2012, 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. In April 2012, the WTO ruled against a U.S. ban on clove-, candy- and chocolate-flavored cigarettes, enacted to curb youth smoking. In each of those cases, U.S. policy changes made to comply with the WTO’s decisions also have been challenged before WTO panels similar to the one that issued today’s ruling.

“The WTO again ruling against a popular U.S. consumer protection will just spur the growing public and congressional concerns about the big Pacific and European trade deals the administration is now pushing and the Fast Track authority to railroad through Congress more agreements that undermine basic consumer rights,” said Wallach.

Background

The COOL policy was created when Congress enacted mandatory country-of-origin labeling for meat – supported by 92 percent of the U.S. public in a recent poll – in the 2008 farm bill. This occurred after 50 years of U.S. government experimentation with voluntary labeling and efforts by U.S. consumer groups to institute a mandatory program.

In their successful challenge of COOL at the WTO, Canada and Mexico claimed that the program violated WTO limits on what sorts of product-related “technical regulations” signatory countries are permitted to enact. The initial WTO ruling was issued in November 2011. Canada and Mexico demanded that the United States drop its mandatory labels in favor of a return to a voluntary program or standards set by an international food standards body in which numerous international food companies play a central role. Neither option would offer U.S. consumers the same level of information as the current labels. The United States appealed.

The WTO Appellate Body sided with Mexico and Canada in a June 2012 ruling against COOL. The U.S. government responded to the final WTO ruling by altering the policy in a way that fixed the problems identified by the WTO tribunal. However, instead of watering down the popular program as Mexico and Canada sought, the U.S. Department of Agriculture responded with a rule change in May 2013 that strengthened the labeling regime. The new policy provided more country-of-origin information to consumers, which satisfied the issues raised in the WTO’s ruling. However, Mexico and Canada then challenged the new U.S. policy. With today’s ruling, the WTO has announced its support for the Mexican and Canadian contention that the U.S. law is still not consistent with the WTO rules.

October 17, 2014

A Trade Storm Is Brewing

At the beginning of the year, we warned you about the upcoming trade tsunami. Well hold on to your hats everyone, because another “trade” storm is heading our way.

Trans-Pacific Partnership (TPP) negotiators are meeting in Australia this month and are aiming to finish the massive 12-country “trade” agreement.

Despite mounting evidence that the TPP should not be completed — including the leak of another part of the top-secret text earlier this week — President Barack Obama wants the TPP done by November 11. That is when he will be meeting with other TPP-country heads of state in China at the Asia-Pacific Economic Conference.

With the TPP’s threats to food safety, Internet freedom, affordable medicine prices, financial regulations, anti-fracking policies, and more, it’s hard to overstate the damage this deal would have on our everyday lives.

But the TPP isn’t the only threat we currently face. We are also up against the TPP’s equally ugly step-sisters: TAFTA and TISA. And Obama wants to revive the undemocratic, Nixon-era Fast Track trade authority that would railroad all three pacts through Congress.

The Trans-Atlantic Free Trade Agreement (TAFTA) is not yet as far along as the TPP, but TAFTA negotiations recently took place in Washington, D.C., and more are set for a few weeks from now in Brussels. The largest U.S. and EU corporations have been pushing for TAFTA since the 1990s. Their goal is to use the agreement to weaken the strongest food safety and GMO labeling rules, consumer privacy protections, hazardous chemicals restrictions and more on either side of the Atlantic. They call this “harmonizing” regulations across the Atlantic. But really it would mean imposing a lowest common denominator of consumer and environmental safeguards.

The Trade in Services Agreement (TISA) is a proposed deal among the United States and more than 20 other countries that would limit countries’ regulation of the service sector. At stake is a roll back of the improved financial regulations created after the global financial crisis; limits on energy, transportation other policies needed to combat the climate crisis; and privatization of public services — from water utilities and government healthcare programs to aspects of public education.

TPP, TAFTA and TISA represent the next generation of corporate-driven “trade” deals. Ramming these dangerous deals through Congress is also Obama’s impetus to push for Fast Track. Fast Track gives Congress’ constitutional authority over trade to the president, allowing him to sign a trade deal before Congress votes on it and then railroad the deal through Congress in 90 days with limited debate and no amendments. Obama opposed Fast Track as a candidate. But now he is seeking to revive this dangerous procedural gimmick.

Because of your great work, we’ve managed to fend off Fast Track so far. This time last year, the U.S. House of Representatives released a flurry of letters showing opposition to Fast Track from most Democrats, and a wide swath of Republicans. This is something the other side was not expecting, and they were shocked. We won that round, but Obama and the corporate lobby are getting ready for the final push.

Because Fast Track is so unpopular in the House, Speaker John Boehner has a devious plan to force the bill through Congress in the “lame duck” session after the November elections. We need to make sure our “ducks” are in a row before that.

Some members of Congress are working on a replacement for Fast Track. U.S. Sen. Ron Wyden (D-Ore.) says he will create what he calls “Smart Track.” It is not yet clear if this will be the real Fast Track replacement we so desperately need, or just another Fast Track in disguise.

Sen. Wyden will want to be ready to introduce his Smart Track bill right as the new Congress starts in January 2015. This means we have only a couple of months left to make sure his replacement guarantees Congress a steering wheel and an emergency brake for runaway “trade” deals.

With all these deadlines drawing near, it’s clear that a knock-down, drag-out fight is imminent. But we will be ready. The TPP missed deadlines for completion in 2011, 2012, and 2013 — if we keep up the pressure, we can add 2014 to that list as well. That’s why there will be a TPP/TAFTA/TISA international week of action Nov 8-14 — more details coming soon!

October 16, 2014

The TPP Would Enroll More Online Spies

By Alberto Cerda, founding member of the Chilean organization Derechos Digitales (Digital Rights)

This article was published this morning (in Spanish) on the Derechos Digitales website here: https://www.derechosdigitales.org/7990/el-tpp-recluta-mas-espionaje-electronico/.


As if we don’t have enough spying on Internet users, the proposed Trans-Pacific Partnership (TPP) includes draft rules that would increase significantly the role of online service providers in keeping an eye on their users, under the pretext of combatting copyright piracy. Even if you are not an infringer, your Internet service provider (ISP) will be watching you, just in case.

The TPP is a so-called trade agreement being negotiated by the U.S. and eleven countries around the Pacific Rim. The TPP would establish binding rules for domestic policies in several fields, from agricultural goods and services to investment and public procurement. The agreement also includes new rules for enforcing intellectual property on the Internet, modeled to some extent on current U.S. law, but in an unbalanced way that fails to incorporate crucial safeguards or allow for policy evolution in the digital environment.

Draft rules under negotiation would impose on Internet service providers a legal obligation to fight against online copyright infringement. This obligation is embodied in several provisions, which would require, for example, ISPs to communicate to their users any supposed infringement committed through their accounts, take down from the Internet information that supposedly infringes on copyright, and collect information that allows identification of users that supposedly have infringed the law.[1]

For most non-American users, these rules are new and raise a number of significant concerns about their potential abuse and misuse by the government, corporations and the big content industry.

For American users, these rules may look similar to the heavily criticized Digital Millennium Copyright Act (DMCA). But the difference is that these rules may go beyond current U.S. law – and as part of a trade agreement they would be much more difficult to overturn, because of being enforceable under international trade law – if U.S. citizens opposed the new rules, Congress wouldn’t be able to repeal them without exposing the country to possible trade sanctions.

Under current U.S. law, companies that provide Internet services are required to participate in enforcing copyright law or risk being held liable for their users’ infringement. This means that companies like AT&T, Comcast, Time Warner Cable and Verizon are required to help enforce the copyrights of the recording and motion picture industries, for example, against their own users who are purported to have infringed upon a copyright. The TPP would take this a step further by enrolling new groups to spy on us by collecting online data about their users.

First, the TPP includes provisions that would extend spying obligations not only to entities that provide Internet services, but to “any person,” thus, not only Internet-related companies would be required to enforce the law, but “any person,” whether human or otherwise.[2] Rights holders would likely interpret this obligation as applying to the manager of a free-wifi zone at Starbucks or your favorite neighborhood cafe, to public libraries and schools, as well as to that neighbor of yours who shares her wifi by keeping it accessible and open.

Second, TPP provisions do not seem to limit this spying to the Internet. Instead they refer to online providers,[3] which may extend the scope of the law to other digital networks, such as intranets and private networks. What does this mean? It means that not only ISPs would be spying on you by collecting user data to protect Hollywood’s copyrights, but also other providers of online services, like the private network you use at your workplace, at your university, or even at your kid’s school, even if those networks do not provide actual access to or from the Internet.

Although the TPP states that Internet service providers would not be required by law to “monitor” users, it encourages this practice.[4] Therefore, the TPP would leave open the door for private agreements between copyright holders (such as the Recording Industry Association of America and the Motion Picture Association of America) and Internet companies for enforcing the law against Internet users (for example, see the Center for Copyright Information).[5] This raises concerns about powerful content industry players working together to promote abusive practices to enforce their interests against supposed infringers, since, in order to prevent any liability, online service providers may collaborate with rights holders to enforce copyrights beyond what is required by the law.[6]

In sum, the TPP would impose new obligations for spying on Internet users under the guise of enforcing copyright. This should raise concerns not only among countries that currently lack such regulations, but also among U.S. citizens, because the TPP would expand the online spy network at home.

 


[1] TPP, Intellectual Property [Rights] Chapter, Addendum III, number  4.

[2] TPP, Intellectual Property [Rights] Chapter, Addendum III, footnote 237.

[3] TPP, Intellectual Property [Rights] Chapter, Addendum III, footnote 237.

[4] TPP, Intellectual Property [Rights] Chapter, Addendum III, number 5.

[6] TPP, Intellectual Property [Rights] Chapter, Addendum III, number 1.

October 07, 2014

Growing Controversy over Investor-State Corporate Privileges in U.S.-EU Deal

Opposition to the once arcane “investor-state dispute settlement” (ISDS) system has ballooned. ISDS empowers foreign corporations to bypass domestic courts, challenge governments’ public interest policies before extrajudicial tribunals and demand compensation.

Widespread resistance to ISDS has pushed the Obama administration to become increasingly defensive about its plan to expand the regime through a proposed Trans-Atlantic Free Trade Agreement (TAFTA) with the European Union (EU). The administration recently published a justification for its push for ISDS. We will address the claims made in that document on this blog over the coming weeks (for a full rebuttal to these claims, click here for our new report).  

The administration’s attempt to quell the controversy surrounding the proposed expansion of ISDS via TAFTA was recently complicated when German government officials made clear that even EU member states do not want the deal to include a parallel legal system for corporations to privately enforce sweeping investor rights. TAFTA must be approved by the 28 EU member states, including Germany.

One day before the Obama administration published its ISDS defense document, Germany’s Federal Minister for Economic Affairs and Energy Sigmar Gabriel warned the European Commission that Germany may oppose TAFTA if ISDS is included in the pact. On March 26, 2014 Gabriel wrote to EU Trade Commissioner Karel De Gucht, “From the perspective of the [German] federal government, the United States and Germany already have sufficient legal protection in the national courts,” and Germany “has already made clear its position that specific dispute settlement provisions are not necessary in the EU-U.S. trade deal.” 

Gabriel’s remarks echo the official anti-ISDS position of the Socialists and Democrats Group, the second largest bloc in the European Parliament, which also must approve TAFTA. The bloc explicitly opposes the inclusion of ISDS in TAFTA out of concern that it would empower foreign firms to undermine health and environmental policies.

Facing mounting governmental and popular rejection of ISDS, the European Commission has sought to make clear that it is the Obama administration that is demanding its inclusion in TAFTA. One week after Gabriel first indicated Germany’s opposition to ISDS in TAFTA, De Gucht clarified that the EU had actually already formally proposed to U.S. negotiators that ISDS be excluded, but that the U.S. government continued to insist on its inclusion: “If the United States agreed to simply drop it [ISDS]…so be it…But they don’t. I’ve already submitted it [the idea] to them, and they don’t.” 

The new President-elect of the European Commission, Jean-Claude Juncker, has already suggested that he opposes ISDS in TAFTA, stating in the TAFTA section of his official policy agenda, “Nor will I accept that the jurisdiction of courts in the EU Member States is limited by special regimes for investor disputes.” The Obama administration, however, has shown no change in its insistence that ISDS be included in the deal.

The Obama administration has also become increasingly isolated at home in pushing for ISDS, as libertarian and Tea Party groups have expressed ISDS opposition alongside the labor, environmental, consumer, health and other organizations that represent the President’s base. In March the libertarian CATO Institute, for example, published an article entitled “A Compromise to Advance the Trade Agenda: Purge Negotiations of Investor-State Dispute Settlement.” 

U.S. state and local governing bodies have also made clear that they see investor-state provisions as a threat to their autonomy and basic tenets of federalism. The National Conference of State Legislatures (NCSL), a bipartisan association representing U.S. state legislatures, many of which are GOP-controlled,  has repeatedly approved a formal position plainly stating that NCSL will oppose any pact that contains ISDS.

Another major complication for the administration’s defense of ISDS is the crescendo of increasingly audacious investor-state cases and rulings seen in recent years. As one policy area after another has come under attack in ISDS cases, opposition to the regime has steadily grown.

Take, for example, the investor-state cases that U.S. tobacco giant Philip Morris International has launched against Uruguay’s tobacco regulations and Australia’s cigarette plain packaging law to curb smoking. The measures have been praised by the World Health Organization as leading public health initiatives. They apply equally to domestic and foreign firms and products. Australia’s highest court ruled against Philip Morris in the firm’s domestic lawsuit against the policies. But using ISDS, Philip Morris is demanding compensation from the two governments, claiming that the public health measures expropriate the corporation’s investments in violation of investor rights established in Bilateral Investment Treaties (BITs).

In another highly contentious case, Vattenfall, a Swedish energy firm that operates nuclear plants in Germany, has levied an investor-state claim for at least $1 billion against Germany for its decision to phase out nuclear power following the 2011 Fukushima nuclear disaster. This comes after Vattenfall successfully used another investor-state case to push Germany to roll back environmental requirements for a coal-fired power plant owned by the corporation. 

Such extrajudicial attacks on nondiscriminatory public interest policies have made clear to the public and legislators that the standard defense of ISDS – that it is a commonsense means for foreign investors to obtain fair treatment if they are discriminated against – does not comport with the reality of the regime, fueling broader ISDS opposition.

Stay tuned for more on the growing controversy surrounding the proposed expansion of the investor-state system via TAFTA, and the Obama administration's weak defenses of the regime. 

October 02, 2014

New Report Takes on Obama Administration Defense of Parallel Legal System for Foreign Corporations

As Growing European Government Opposition to Investor-State Regime Shadows This Week’s U.S.-EU Talks, Analysis of Investment Data Reveals That Inclusion of Regime in Transatlantic Pact Would Empower Attacks Against U.S., EU Policies by 70,000 Additional Firms

The Obama administration’s precarious justifications for the investor-state dispute settlement (ISDS) regime may determine the fate of the transatlantic free trade agreement, said Public Citizen as it released a new report examining those defenses and revealing data on the U.S. and European Union (EU) firms that would be newly empowered to attack domestic policies in extrajudicial tribunals if the pact includes ISDS. Recently, the incoming European Commission president, several large voting blocs in the European Parliament and the German government have voiced opposition to ISDS.

“The ugly political spectacle of the Obama administration insisting on special privileges and a parallel legal system for foreign corporations over European officials’ growing objections is only made worse by the utter lack of policy justifications for ISDS,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “As a slew of domestic laws are being attacked in these corporate tribunals, European officials are rethinking past support for ISDS while the Obama administration just doubles down.”

The Obama administration has also become increasingly isolated at home in pushing for ISDS, as libertarian and tea party groups have expressed ISDS opposition alongside the labor, environmental, consumer, health and other organizations that represent the president’s base. The ISDS system, included in some past U.S. and EU trade or investment pacts, empowers foreign corporations to bypass domestic courts, and challenge domestic policies and government actions before extrajudicial tribunals authorized to order taxpayer compensation for claimed violations of investor rights and privileges included in the pacts.

Trying to quell the mounting controversy, the administration has issued a series of ISDS defenses that Public Citizen refutes in its new report, “Myths and Omissions: Unpacking Obama Administration Defenses of Investor-State Corporate Privileges” (PDF). The report documents the increasingly audacious use of ISDS cases to attack policies ranging from Germany’s phase-out of nuclear power after the Fukushima disaster to Australia’s landmark plain packaging cigarette law to a Canadian province’s moratorium on fracking and that country’s national medicine patent policy. In recent months, South Africa and Indonesia have joined the list of countries announcing the termination of ISDS-enforced agreements.

Using official data on cross-border investments, the report reveals that, were the U.S.-EU pact to include ISDS, it would newly empower corporate claims against domestic policies on behalf of more than 70,000 foreign firms – an unprecedented increase in investor-state liability for both the United States and the EU.

“Given the vast threats that these corporate privileges pose to our health, our environment, our democracy and our tax dollars, it’s little surprise that European officials have joined the broad chorus concerned about this extreme system,” said Wallach. “Now all eyes are on the Obama administration: Will it continue peddling baseless defenses of these corporate protections even if that means the demise of its priority U.S.-EU pact?”

The Public Citizen report details instances in which governments have rolled back or chilled health and environmental protections in response to ISDS cases and threats under existing pacts. It describes how ISDS cases have undermined the rule of law by empowering extrajudicial panels of private-sector attorneys to contradict domestic court rulings in decisions not subject to any substantive appeal. And contrary to the administration’s claims, the report explains precisely how ISDS grants foreign corporations greater procedural and substantive rights than domestic firms, including a right to demand compensation for nondiscriminatory public interest policies that frustrate the corporations’ expectations.

“Rather than try to silence critical voices with far-fetched reassurances, the Obama administration should heed widespread warnings of the threats posed by this parallel legal system for corporations and scrap its stubborn fealty to ISDS,” said Ben Beachy, research director of Public Citizen’s Global Trade Watch. “As the world rejects this extraordinary regime, we cannot afford to further embrace it.”

Additional reasons for the current ISDS controversy described in the report, which goes point-by-point through the administration’s claims, include:

  • ISDS cases are surging. While treaties with ISDS provisions have existed since the 1960s, just 50 known ISDS cases were launched in the regime’s first three decades combined (through 2000). In contrast, corporations have launched more than 50 ISDS claims in each of the past three years.
  • Under U.S. free trade agreements (FTA) alone, foreign firms already have pocketed more than $430 million in taxpayer money via investor-state cases. Tribunals have ordered more than $3.6 billion in compensation to investors under all U.S. bilateral investment treaties and FTAs. More than $38 billion remains in pending ISDS claims under these pacts.
  • Numerous studies have failed to find that ISDS-enforced pacts cause an increase in foreign direct investment – the ostensible reason for governments to subscribe to the pacts’ extraordinary terms. As promised benefits of ISDS have proven illusory while tangible costs to taxpayers and safeguards have grown, an increasing number of governments have begun to reject the investor-state regime. But as they have moved to terminate ISDS-enforced pacts, foreign investment has grown.
  • The structure of the ISDS regime has created a biased incentive system in which tribunalists can boost their caseload by using broad interpretations of foreign investors’ rights to rule in favor of corporations and against governments, and boost their earnings by dragging cases out for years.
  • Purported safeguards and explanatory annexes added to agreements in recent years have failed to prevent ISDS tribunals from exercising enormous discretion to impose on governments’ obligations that they never undertook when signing agreements.
  • Transparency rules and amicus briefs are insufficient to hold accountable tribunals that remain unrestrained by precedent, countries’ opinions or substantive appeals.
  • State and local governments have no standing to defend the state and local policies that often are challenged in ISDS cases.
  • The Obama administration has repeatedly ignored ISDS opposition from Congress, the bipartisan National Conference of State Legislatures, diverse public interest groups and legal scholars.

Read the report.

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