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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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« April 2017 | Main

May 22, 2017

Ecuador Says No to ISDS, Exits BITs*

After years of sustained activism in Latin America and across the globe, the President of Ecuador recently terminated its remaining 16 treaties that empower multinational corporations to challenge its laws before panels of three corporate lawyers and demand unlimited sums of taxpayer money.

By terminating treaties that include the corporate-rigged investor-state dispute settlement (ISDS) system, Ecuador is the latest country to prioritize its people over corporate rights.

Ecuador’s decision to terminate its ISDS pacts was spurred by firsthand experience with some egregious cases, particularly with Big Oil. For example, Chevron is looking to avoid paying for its massive pollution in the Ecuadorian Amazon. And, Occidental Petroleum received a $1.4 billion award against Ecuador despite having obviously violated its contract with the government.

In response to citizens’ uproar against ISDS throughout Latin America, in 2013, the Ecuadorian government established an audit commission of government officials, academics, lawyers and civil society groups to analyze the costs and benefits of the country’s existing treaties and make recommendations.

On May 8, the government made public the Audit Commission’s 688-page report, which recommended that the government should terminate its remaining treaties and develop an alternative investment treaty model that removes ISDS and rebalances the rights of citizens over corporations.

The Audit Commission reported that the treaties had failed to deliver on promised foreign investment and had, in fact, undermined the development objectives laid out in Ecuador’s constitution. The report found that Ecuador had been forced to pay nearly $1.5 billion to multinational corporations (equivalent to 62 percent of its annual health spending), and that, under currently pending cases, the government runs the risk of having to pay out $13.4 billion (more than half the government’s entire annual budget for 2017).

Ecuador’s President Raphael Correa heeded the advice in the Audit Commission’s report and on May 16, 2017, issued executive decrees that terminated the existing treaties, including its treaty with the United States.

Ecuador joins countries — such as South Africa, Indonesia, Bolivia and India — that have terminated their investment treaties. Meanwhile, Mercosur and the South African Development Community have recently explicitly excluded ISDS from their respective investment protocols.

And Ecuador’s move away from ISDS-enforced treaties mirrors the growing movements in Europe and the United States to stop the expansion of corporate power through ISDS. Bipartisan opposition to ISDS in the Trans-Pacific Partnership (TPP) was a significant reason that the deal could never achieve majority support in the U.S. Congress. The wave of opposition to ISDS in Europe also helped to stall the U.S.-EU negotiations for a Transatlantic Trade and Investment Partnership (TTIP).

Worldwide, the tide is turning against the notion that multinational corporations and investors should be granted extraordinary rights and the ability to enforce them against governments in a corporate-rigged, extrajudicial system. Ecuador’s announcement shows that the diverse movement of civil society, legal scholars and government officials concerned about ISDS are making progress in rolling back the regime.

In the United States, the upcoming renegotiation of the North American Free Trade Agreement (NAFTA) is an obvious opportunity to demand that ISDS be eliminated from any NAFTA replacement.

As pressure grows worldwide for governments to withdraw from the ISDS system, the Trump administration has 60 days before it must reveal its position. (Under Fast Track, the administration must publicly post a detailed description of its negotiating plans 60 days after the initial notice.)

Given that ISDS was a key contributor to the U.S. Congress’ opposition to the TPP, it is not surprising that the administration’s NAFTA renegotiation notice was greeted by demands from Congress and civil society that ISDS elimination must be a top priority.  

*Updated 5/22/17 .

May 18, 2017

Will NAFTA Renegotiation Produce TPP 2.0 and Intensify Damage? Or Fulfill Trump Promise of a ‘Much Better’ Deal for Working Americans? Maintaining Secretive Process With 500 Official Corporate Advisers Does Not Bode Well

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

Note: Today, the Trump administration sent formal notice of NAFTA renegotiation to Congress.

As a candidate, Donald Trump promised to make NAFTA “much better” for working people. Today’s notice is markedly vague. But Trump’s NAFTA renegotiation plan that leaked in late March described just what the corporate lobby is demanding: using NAFTA talks to revive parts of the Trans-Pacific Partnership (TPP), like expanded investor incentives to offshore jobs that could make NAFTA even worse for working people.

The obvious measure of whether NAFTA renegotiation is intended to benefit working people is if Trump makes clear he will eliminate NAFTA’s special investor rights that make it easier to offshore American jobs and attack our laws before tribunals of three corporate lawyers who can award the firms unlimited sums of taxpayer money.

If corporate elites are allowed to dictate how NAFTA is renegotiated, the agreement could become more damaging for working families and the environment in the three countries. And modest tweaks will not stop NAFTA’s ongoing damage, much less deliver on Trump’s promises for a deal that will create American jobs and raise wages.

Already the 500 corporate trade advisers who got us into the TPP have been consulted on NAFTA renegotiations, while the few labor advisers were shut out of that March meeting. And the public and Congress are being left in the dark about negotiating plans and goals.

If Trump won’t make negotiations transparent – by issuing detailed goals and making draft texts available – how can the public know that the deal is not being shaped to benefit Trump’s many Canadian and Mexican investments, or that the Goldman Sachs team in the White House isn’t turning NAFTA into TPP 2.0?

Trump’s conflicts of interest and self-dealing opportunities with NAFTA renegotiation are not hypothetical; the sprawling Trump business empire has 14 Canadian and two Mexican investments. Some of Trump’s clothing line is made in Mexico. Trump won’t divest his business holdings or release his tax returns, so unless he reveals his full Mexican and Canadian business dealings, we won’t even know in whose interest these NAFTA talks are being conducted.

Trump’s broken promises on trade are piling up. Instead of punishing firms that offshore American jobs, he has awarded United Technologies 15 lucrative new government contracts even after they proceeded to offshore 1,200 of their 2,000 Indiana Carrier jobs. Instead of enacting the promised “get tough on China” trade policy, he flip-flopped on his pledge to declare China a currency manipulator on Day One and has done nothing to counter our massive $347 billion China trade deficit.

May 04, 2017

Today’s Five-Year Korea FTA Data Show March Imports From Korea Higher Than All But One Month Since Pact Started: What Is Trump’s Plan for Pact?

U.S. Trade Deficit With Korea Has Soared as U.S. Exports Have Fallen; Imports Jumped Since 2012 U.S.-Korea Free Trade Agreement

WASHINGTON, D.C. –Imports from Korea in March 2017 were higher than any month but one in the five years the U.S.-Korea Free Trade Agreement (FTA) has been in effect. Today’s release of new U.S. Census trade data for the first full five years of the Korea FTA spotlight statements from both President Donald Trump and Vice President Mike Pence in the past month that the pact’s outcomes are unacceptable. While the statements were notable for coming despite escalating military tensions on the Korean Peninsula, what the administration will do about the pact and when remains a mystery.

“Our trade deficit with Korea has increased dramatically under this agreement, which Trump bashed on the campaign trail, and workers in the swing states that elected Trump have been hardest hit, so what will Trump do about it,” asked Lori Wallach, director of Public Citizen’s Global Trade Watch.

While then-Representative Pence voted to pass the agreement in 2011, now-Vice President Pence, in an April 2017 trip to Seoul, declared the pact to be “falling short” and needing review and reform. Later that month, Trump declared of the Korea deal: “We’ve told them that we’ll either terminate or negotiate. We may terminate.”  Trump spotlighted the “job-killing trade deal with South Korea” in his nomination acceptance speech and on the stump, where he also often noted that “this deal doubled our trade deficit with South Korea and destroyed nearly 100,000 American jobs.”

Many of Trump’s trade-related campaign pledges were broken in his first 100 days, calling into question the prospects for action on the Korea pact. A powerful White House faction opposes the trade policy changes that Trump promised would deliver more American jobs and lower deficits.

The agreement, sold by the Obama administration with a “more export, more jobs” slogan, has resulted in U.S. exports to Korea declining 7.8 percent ($3.7 billion) and imports from Korea increasing 13.1 percent ($8.1 billion) by the end of its fifth year. The 85 percent trade deficit increase with Korea under the pact – from $14 billion in the 12 months before the pact went into effect on March 15, 2012, to $26 billion in its fifth year – came in the context of the overall U.S. trade deficit with the world decreasing by 5 percent. While U.S. goods imports from the world decreased by 7.1 percent, goods imports from Korea increased by 13.1 percent.

Defenders of the pact claim the results stem from weakness in Korea’s economy, but in fact, Korea’s GDP has risen by 15 percent from 2011 to 2016 while the unemployment rate has averaged 3.4 percent – hardly the indicators of a weak economy. 

Meanwhile, the U.S. service sector trade surplus with Korea has increased by only $2 billion from 2011 to 2015 a growth rate of 29 percent in its five years in effect that is notably 64 percent slower than our services surplus growth over the five years before the FTA went into effect. (Service sector data for the full fifth year of the deal will be released in October.)

Despite the Korea FTA including more than 10,000 tariff cuts, 80 percent of which began on Day One:

  • Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 59 of the 60 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit in the five years before the deal.
  • Since the FTA took effect, U.S. average monthly exports to Korea have fallen in 9 of the 15 U.S. sectors that export the most to Korea, relative to the year before the FTA.
  • The auto sector was among the hardest hit: The U.S. trade deficit with Korea in motor vehicles grew 55.7 percent in the pact’s first five years. U.S. imports of motor vehicles from Korea have increased by 64.2 percent, or $6.4 billion by the fifth year of the Korea FTA.
  • Exports of machinery and computer/electronic products, collectively comprising 27 percent of U.S. exports to Korea, have fallen 17.1 and 18.8 percent, respectively.
  • U.S. exports to Korea of agricultural goods have fallen 5.4 percent in the first five years of the Korea FTA, despite almost two-thirds of U.S. agricultural exports by value obtaining immediate duty-free entry to Korea under the pact. U.S. agricultural imports from Korea, meanwhile, have grown 45.4 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined 8.1 percent, or $554 million, since the FTA’s implementation. The Obama administration promised that U.S. exports of meat would rise particularly swiftly, thanks to the deal’s tariff reductions on these products. However, despite U.S. officials’ promises that the pact would enhance cooperation between the U.S. and Korean governments to resolve food safety and animal health issues that affect trade, South Korea has imposed temporary bans on imports of American poultry in each of the last three years, including 2017. Comparing the fifth year of the FTA to the year before it went into effect, U.S. poultry producers have faced a 78 percent collapse of exports to Korea – a loss of 82,000 metric tons of poultry exports to Korea. U.S. pork exports have also dropped 1 percent.

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