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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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July 10, 2014

Civil Society Organizations Oppose U.S.-EU ‘Trade’ Pact Proposals That Would Undermine Chemical Safety Protections

111 Consumer, Health, Environmental, Labor Groups Warn Trade Ministers About TTIP Proposals That Would Endanger Public Health

In a letter today, a broad array of major U.S. and European chemical safety, health, environmental, labor, consumer and other organizations expressed strong opposition to proposed rules for the Transatlantic Trade and Investment Partnership (TTIP) that could chill or roll back robust chemical safety standards on both sides of the Atlantic. 

The letter was sent to U.S. Trade Representative Michael Froman and EU Commissioner for Trade Karel de Gucht, in advance of the sixth round of TTIP negotiations, which are to begin in Brussels next week.

“EU and U.S. trade policy should not be geared toward advancing the chemical industry’s agenda at the expense of public health and the environment – but that appears to be exactly what is currently underway with TTIP,” the letter states. “The presence of toxic chemicals in our food, our homes, our workplaces, and our bodies is a threat to present and future generations, with staggering cost for society and individuals.”  

“U.S. and EU negotiators appear to have bought the chemical corporations’ argument that this so-called ‘trade’ deal should go well beyond trade and target our safeguards from toxic chemicals as ‘barriers to trade,’ which could continue public exposure to hazardous substances in unsafe workplaces, toxic lakes and rivers, and tainted food and toys” said Lori Wallach, director of Public Citizen’s Global Trade Watch and one of the letter’s signatories. “If the U.S. and EU governments want to have any hope of stemming the controversy surrounding this proposed pact, they must reverse course and keep our chemical safety protections out of their closed-door “trade” negotiations.” 

At next week’s TTIP negotiations, draft text will be presented for the first time for several of the proposed pact’s chapters that could directly undermine strong chemical safety rules. The texts will be kept secret from the public during negotiations, but the rules that would be established would be binding on the United States and EU member nations, with trade sanctions or cash fines ordered against domestic policies that do not comply with TTIP rules.

The letter highlights specific TTIP proposals that the U.S. and EU governments and industry interests have put forward that could chill U.S. efforts to strengthen chemical regulations while weakening tighter EU chemical protections. This includes a U.S. proposal for regulatory coherence that could “thwart the timely promulgation of important regulations” and an EU Regulatory Cooperation Council proposal that would require regulators to calculate “chemical regulations’ costs to transatlantic trade, not the benefits of such protective laws for society.” 

The letter also rejects a controversial proposal – opposed by U.S. state legislators, some EU member states and a transpartisan array of U.S. and EU civil society groups – to include “investor-state dispute settlement” terms in the TTIP. Already inclusion of such terms in other pacts has empowered corporations to circumvent domestic courts and directly challenge controls for the use of hazardous substances, pollution cleanup requirements and other chemical protections before extrajudicial tribunals authorized to order unlimited taxpayer compensation for violations of broad foreign investor “rights.” Such extraordinary provisions, according to the letter, “would force the public and their representatives to decide between compensating corporate polluters for lost profits due to stronger laws, or continuing to bear the health, economic and social burdens of pollution.”

The letter concludes by criticizing the negotiations’ lack of transparency: “In a deal where fundamental changes to sub-national, national and regional policies and lawmaking processes are being proposed and negotiated, the non-disclosure of TTIP negotiating positions or texts is inexcusable and inconsistent with the principles of a modern democracy.” 

June 09, 2014

On Fifth Anniversary of Peru FTA Bagua Massacre of Indigenous Protestors, State Department Cables Published on Wikileaks Reveal U.S. Role

Now, Obama Administration Seeks to Further Expand the Foreign Investor Privileges That Led to Amazon Standoff Via the Trans-Pacific Partnership Pact

On the fifth anniversary of a deadly confrontation in Peru spurred by controversial policies enacted to comply with the U.S.-Peru Free Trade Agreement (FTA), Amazon Watch and Public Citizen expressed extreme concern over recently revealed U.S. diplomatic cables showing the U.S. government’s role in the violence that resulted in the deaths of at least 32 people.

On June 5, 2009, Peruvian security forces attacked several thousand indigenous Awajun and Wambis protestors, including many women and children, who were blocking the “Devil's Curve,” a jungle highway near Bagua, 600 miles north of Lima. The protestors were demanding revocation of decrees providing new access to exploit their Amazonian lands for oil, gas and logging that had been enacted to conform Peruvian law to FTA requirements.

“The Bagua massacre is emblematic of how so-called free trade agreements enable an environment in which governments trample the basic rights of grassroots communities while promoting the destruction of natural resources,” said Atossa Soltani, founder and executive director of Amazon Watch. “Instead of defending the constitutional rights of Peru’s indigenous peoples, the U.S. government apparently encouraged the Peruvian government to steamroll the people protecting their land from exploitation.”

Public Citizen received only heavily redacted diplomatic cables in response to a Freedom of Information Act request regarding the U.S. role in the 2009 Peruvian crisis over FTA implementation. But now WikiLeaks has published the full text of messages between the State Department and the embassy in Lima.

Four days before the killings, a cable addressed the growing indigenous protests, stating, “Should Congress and [Peruvian] President Garcia give in to the pressure, there would be implications for the recently implemented Peru-US Free Trade Agreement.” This mirrored public comment by Peruvian government officials who argued that acceding to indigenous demands to annul controversial new laws would doom the entire FTA.

U.S. officials argued that the Peruvian government was being too lenient by allowing the indigenous roadblocks to continue. “The government's reluctance to use force to clear roads and blockades is contributing to the impression that the communities have broader support than they actually do,” the cable read.

On the day of the killings, the U.S. Embassy in Lima sought to justify the government’s actions, stating in another cable that the security forces in Bagua had “reluctantly chosen to enforce the rule of law.” Unacknowledged was the fact that the groups blocking the road at the “Devil’s Curve” had expressed their intention to demobilize on June 5 starting around midday. The Peruvian riot police went in that morning at the break of dawn.

In a letter sent on June 12, 2009, 15 nongovernmental organizations urged the Obama administration to speak out publicly against the violent repression and to state that repeal or reform of the controversial laws would not conflict with Peru’s obligations under the FTA. No public statement was issued.

What has become known as the “Amazon’s Tiananmen” brought the realities of the U.S.-Peru FTA into sharp relief. Rather than being a new trade agreement model, as it was sold, at the FTA’s heart were the same extreme investor rights that animated the North American Free Trade Agreement (NAFTA).

“The fifth anniversary of the Peru FTA Bagua massacre is a most appropriate time to reconsider the U.S. approach to the Trans-Pacific Partnership (TPP),” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The U.S.-Peru FTA makes clear even improved labor and environmental chapters cannot overcome the NAFTA-style investor protections at the core of the Peru FTA and now TPP.”

When Congress passed the U.S.-Peru FTA in late 2007, a majority of House Democrats opposed the deal. And no labor, environmental, consumer, family farm or faith group supported it. While Democratic House trade committee leaders had forced some improvements with respect to access to medicine and the FTA’s labor and environmental chapters, the pact included an expansion of NAFTA-style investor privileges.

The FTA’s foreign investor privileges were demonstrated when a U.S. firm pressured Peru’s government to reopen a smelter that had severely poisoned hundreds of children in La Oroya, Peru with lead – a story revealed in a Bloomberg exposé.

Now the Obama administration is pushing for inclusion of the same extreme foreign investor privileges in the TPP it is negotiating with Peru and 10 other Pacific Rim countries.

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.

February 19, 2014

Fact-checking Froman: The Top 10 Myths Used by Obama’s Top Trade Official

U.S. Trade Representative Michael Froman tried in a speech yesterday to defend the Obama administration’s beleaguered trade policy agenda: the controversial Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA) pacts and an unpopular push to Fast Track those sweeping deals through Congress.  The list of those publicly opposing the Fast Track push includes most House Democrats, a sizeable bloc of House Republicans, House Minority Leader Nancy Pelosi, Senate Majority Leader Harry Reid, and 62% of the U.S. voting public

In attempt to justify the administration’s polemical pacts, Froman resorted to some statements of dubious veracity, ranging from half-truths to outright mistruths.  To set the record straight, here are the top 10 Froman fables, followed by inconvenient facts that undercut his assertions and help explain the widespread opposition to TPP, TAFTA, and Fast Track.

1. Access to affordable medicines

  • Froman:  “[In TPP] we’re working to find better ways to foster affordable access to medicines…” 

2. Income inequality

  • Froman:  “Our trade policy is a major lever for encouraging investment here at home in manufacturing, agriculture and services, creating more high-paying jobs and combating wage stagnation and income inequality.”
  • Fact:  First, study after study has shown no correlation between a country’s willingness to sign on to TPP-style pacts and its ability to attract foreign investment, casting doubt on Froman’s promise of a job-creating investment influx.  But more importantly, Froman opted to ignore a big part of why U.S. workers are currently enduring such acute levels of “wage stagnation and income inequality.”  He did not mention the academic consensus that status quo U.S. trade policy, which the TPP would expand, has contributed significantly to the historic rise in U.S. income inequality.  The only debate has been the extent of trade’s inequality-exacerbating impact.  A recent study estimates that trade flows have been responsible for more than 90% of the rise in income inequality occurring since 1995, a period characterized by trade pacts that have incentivized the offshoring of decently-paid U.S. jobs and forced U.S. workers to compete with poorly-paid workers abroad.  How can the TPP, a proposed expansion of the trade policies that have exacerbated inequality, now be expected to ameliorate inequality? 

3. Internet freedom

  • Froman:  “I’ve heard some critics suggest that TPP is in some way related to SOPA [the Stop Online Piracy Act].  Don’t believe it.  It just isn’t true….”
  • Fact:  Froman’s attempt to assuage fears of a TPP-provided backdoor to SOPA-like limits on Internet freedom would be more convincing if a) he offered details beyond “it just isn’t true,” or b) if his statement didn’t directly contradict leaked TPP texts.  A November leak of the draft TPP intellectual property chapter revealed, for example, that the U.S. is proposing draconian copyright liability rules for Internet service providers that, like SOPA, threaten to curtail Internet users’ free speech.  Indeed, while nearly all other TPP countries have agreed to a proposed provision to limit Internet service providers’ liability, the United States is one of two countries to oppose such flexibility.

4. Corporate trade advisors

  • Froman:  “Our cleared advisors do include representatives from the private sector… [but] they [also] include representatives from every major labor union, public health groups…environmental groups…as well as development NGOs...” 
  • Froman:  “I’m pleased to announce that we are upgrading our advisory system to provide a new forum for experts on issues like public health, development and consumer safety.  A new Public Interest Trade Advisory Committee, or PTAC, will join the Labor Advisory Committee and the Trade and Environment Policy Advisory Committees to provide cross-cutting platforms for input in the negotiations.”
  • Fact:  Froman’s announcement of a new “public interest” committee – a response to the outcry over the vast imbalance of this corporate-dominated advisory system – offers too little, too late. Amid a slew of advisory committees exclusively devoted to narrow industry interests, the “public interest” now gets a single committee?  And how much influence will this committee have in changing the many core TPP provisions that threaten the public interest, now that the administration hopes to conclude TPP negotiations, which have been going on for four years, in the coming months?  Proposed as a TPP afterthought, this new committee comes across as window-dressing, not a genuine restructuring of a system that gives corporations insider access to an otherwise closed trade negotiation process.

5. Fast Track

  • Froman:  Fast Track is “the mechanism by which Congress has worked with every administration since 1974 to define its marching orders on what to negotiate…”  We can use Fast Track to “require[] future administrations to require labor, environmental and innovation and access to medicines [standards]…”
  • Fact:  Under Fast Track, Congress has not given the administration “marching orders” so much as marching suggestions.  Though Congress inserted non-binding “negotiating objectives” for U.S. pacts into past Fast Track bills – a model replicated in the unpopular current legislation to revive Fast Track for the TPP and TAFTA – Democratic and GOP presidents alike have historically ignored negotiating objectives included in Fast Track.  For example, Froman stated that Fast Track could be used to require particular labor standards.  But while the 1988 Fast Track used for the North American Free Trade Agreement (NAFTA) and the establishment of the World Trade Organization (WTO) included a negotiating objective on labor standards, neither pact included such terms.  The history shows that Fast-Tracked pacts that ignore Congress’ priorities can still be signed by the president (locking in the agreements’ contents) before being sent to Congress for an expedited, ex-post vote in which amendments are prohibited and debate is restricted. 

6. Currency manipulation

  • Froman:  In response to a question of whether currency manipulation is being addressed in the TPP: “We take the issue of exchange rates or currency manipulation very seriously as a matter of policy…”
  • Fact:  U.S. TPP negotiators have not even initiated negotiations on the inclusion of binding disciplines on currency manipulation, much less secured other countries’ commitment to those disciplines.  The U.S. inaction on currency in the TPP contrasts with letters signed by 230 Representatives (a majority) and 60 Senators (a supermajority) demanding the inclusion of currency manipulation disciplines in the TPP.  Unless U.S. negotiators take currency manipulation more “seriously,” the TPP may be dead on arrival in the U.S. Congress. 

7. Labor rights

  • Froman:  “In TPP we’re seeking to include disciplines requiring adherence to fundamental labor rights, including the right to organize and to collectively bargain, protections from child and forced labor and employment discrimination.” 
  • Fact:  The TPP includes Vietnam, a country that bans independent unions.  And Vietnam was recently red-listed by the Department of Labor as one of just four countries that use both child labor and forced labor in apparel production.  While Froman acknowledged such “serious challenges,” he did not explain how they would be resolved.  Is Vietnam going to change its fundamental labor laws so as to allow independent unions?  Is the government going to revamp its enforcement mechanisms so as to eliminate the country’s widespread child and forced labor?  Barring such sweeping changes, will the U.S. still sign on to a TPP that includes Vietnam?  

8. Environmental protection

  • Froman:  “We’re asking our trading partners to commit to effectively enforce environmental laws…”
  • Fact:  While Froman touted several provisions in the draft TPP environment chapter as requiring enforcement of domestic environmental laws, he didn’t mention the draft TPP investment chapter that would empower foreign corporations to directly challenge those laws before international tribunals if they felt the laws undermined their expected future profits.  Corporations have been increasingly using these extreme “investor-state” provisions under existing U.S. “free trade” agreements (FTAs) to attack domestic environmental policies, including a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges.  Froman’s call for countries to enforce their environmental laws sounds hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement.

9. TPP secrecy

  • Froman:  “Let me make one thing absolutely clear: any member of Congress can see the negotiating text anytime they request it.”
  • Fact:  For three full years negotiations, members of Congress were not able to see the bracketed negotiating text of the TPP, a deal that would rewrite broad swaths of domestic U.S. policies.  Only after mounting outcry among members of Congress and the public about this astounding degree of secrecy did the administration begin sharing the negotiating text with members of Congress last June.  Even so, the administration still only provides TPP text access under restrictive terms for many members of Congress, such as requiring that technical staff not be present and forbidding the member of Congress from taking detailed notes or keeping a copy of the text.  Meanwhile, the U.S. public remains shut out, with the Obama administration refusing to make public any part of the TPP negotiating text.  Such secrecy falls short of the standard of transparency exhibited by the Bush administration, which published online the full negotiating text of the last similarly sweeping U.S. pact (the Free Trade Area of the Americas). 

10. Exports under FTAs

  • Froman:  “Under President Obama, U.S. exports have increased by 50%...”  “Today the post-crisis surge in exports we experienced over the last few years is beginning to recede.  And that’s why we’re working to open markets in the Asia-Pacific and in Europe...”
  • Fact:  U.S. exports grew by a grand total of 0% last year under the current “trade” pact model.   The year before that, they grew by 2%.  Most of the export growth Froman cites came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP and TAFTA).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  Indeed, the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

February 13, 2014

Obama Mexico Visit Spotlights 20-Year Legacy of Job Loss from NAFTA, the Pact on Which Obama’s TPP Is Modeled

New Public Citizen Report Catalogs the Negative NAFTA Outcomes That Are Fueling Opposition to Obama Push to Fast Track TPP

The 20-year record of job loss and trade deficits from the North American Free Trade Agreement (NAFTA) is haunting President Barack Obama’s efforts to obtain special trade authority to fast track the Trans-Pacific Partnership (TPP), said Public Citizen as it released a new report that comprehensively documents NAFTA’s outcomes. Next week’s presidential trip to Mexico for a long-scheduled “Three Amigos” U.S.-Mexico-Canada summit will raise public attention to NAFTA, on which the TPP is modeled, which is not good news for Obama’s push for the TPP and Fast Track.

Numerous polls show that opposition to NAFTA is among few issues that unite Americans across partisan and regional divides. Public ire about NAFTA’s legacy of job loss and policymakers’ concerns about two decades of huge NAFTA trade deficits have plagued the administration’s efforts to obtain Fast Track trade authority for the TPP. The TPP would expand the NAFTA model to more nations, including ultra-low-wage Vietnam. In the U.S. House of Representatives, most Democrats and a bloc of GOP have indicated opposition to Fast Track, as has Senate Majority Leader Harry Reid (D-Nev.).

Public Citizen’s new report, "NAFTA’s 20-Year Legacy and the Fate of the Trans-Pacific Partnership", compiles government data on NAFTA outcomes to detail the empirical record underlying the public and policymaker sentiment. It also shows that warnings issued by NAFTA boosters that a failure to pass NAFTA would result in foreign policy crises – rising Mexican migration and a neighboring nation devolving into a troubled narco-state – actually came to fruition in part because of NAFTA provisions that destroyed millions of rural Mexican livelihoods.

“Outside of corporate boardrooms and D.C. think tanks, Americans view NAFTA as a symbol of job loss and a cancer on the middle class,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “If you are a president battling to overcome bipartisan congressional skepticism about giving you special trade authority to fast track a massive 12-nation NAFTA expansion, it is really not helpful to be visiting Mexico for a summit of NAFTA-nation leaders.”

The Public Citizen report shows that not only did projections and promises made by NAFTA proponents not materialize, but many results are exactly the opposite. Such outcomes include a staggering $177 billion U.S. trade deficit with NAFTA partners Mexico and Canada, one million net U.S. jobs lost in NAFTA’s first decade alone, slower U.S. manufacturing and services export growth to Mexico and Canada, a doubling of immigration from Mexico, larger agricultural trade deficits with Mexico and Canada, and more than $360 million paid to corporations after “investor-state” tribunal attacks on, and rollbacks of, domestic public interest policies.

“The data have disproved the promises of more jobs and better wages, so bizarrely now NAFTA defenders argue the pact was a success because it expanded the volume of U.S. trade with the two countries without mentioning that this resulted in a 556 percent increase in our trade deficit with those countries, with a flood of new NAFTA imports wiping out hundreds of thousands of American jobs,” said Wallach.

The study tracks specific promises made by U.S. corporations like Chrysler, GE and Caterpillar to create specific numbers of American jobs if NAFTA was approved, and reveals government data showing that instead, they fired U.S. workers and moved operations to Mexico.

“The White House and the corporate lobby sold NAFTA with promises of export growth and job creation, but the actual data show the projections were at best wrong,” said Wallach. “The gulf between the gains promised for NAFTA and the damage that ensued means that the public and policymakers are not buying the same sales pitch now being made for theTPP and Fast Track.”

The report also documents how post-NAFTA trade and investment trends have contributed to middle-class pay cuts, which in turn contributed to growing income inequality; how since NAFTA, U.S. trade deficit growth with Mexico and Canada has been 50 percent higher than with countries not party to a U.S. Free Trade Agreement, and how U.S. manufacturing and services exports to Canada and Mexico have grown at less than half the pre-NAFTA rate.

Among the study’s findings:

  • Rather than creating in any year the 200,000 net jobs per year promised by former President Bill Clinton on the basis of Peterson Institute for International Economics projections, job loss from NAFTA began rapidly:
    • American manufacturing jobs were lost as U.S. firms used NAFTA’s foreign investor privileges to relocate production to Mexico, and as a new flood of NAFTA imports swamped gains in exports, creating a massive new trade deficit that equated to an estimated net loss of one million U.S. jobs by 2004. A small pre-NAFTA U.S. trade surplus of $2.5 billion with Mexico turned into a huge new deficit, and a pre-NAFTA $29.6 billion deficit with Canada exploded. The 2013 NAFTA deficit was $177 billion, representing a more than six-fold increase in the NAFTA deficit.
    • More than 845,000 specific U.S. workers, most in the manufacturing sector, have been certified for Trade Adjustment Assistance (TAA) since NAFTA because they lost their jobs due to offshoring to, or imports from, Canada and Mexico.The TAA program is narrow, covering only a subset of jobs lost at manufacturing facilities, and is difficult to qualify for. Thus, the TAA numbers significantly undercount NAFTA job loss. A TAA database searchable by congressional district, sector and more is available here.
    • According to the U.S. Bureau of Labor Statistics, two out of every three displaced manufacturing workers who were rehired in 2012 experienced a wage reduction, most of them taking a pay cut of greater than 20 percent.  
    • As increasing numbers of workers displaced from manufacturing jobs have joined those competing for non-offshorable, low-skill jobs in sectors such as hospitality and food service, real wages have also fallen in these sectors under NAFTA. The resulting downward pressure on middle-class wages has fueled recent growth in income inequality.
  • Scores of environmental and health laws have been challenged in foreign tribunals through NAFTA’s controversial investor-state dispute resolution system. More than $360 million in compensation to investors has been extracted from NAFTA governments via “investor-state” tribunal challenges against toxics bans, land-use rules, water and forestry policies, and more. More than $12.4 billion is pending in such NAFTA claims, including challenges of medicine patent policies, a fracking moratorium and a renewable energy program.
  • The average annual U.S. agricultural trade deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. U.S. beef imports from Mexico and Canada, for example, have risen 133 percent. Over the past decade,  total U.S. food exports to Mexico and Canada have actually fallen slightly while U.S. food imports from Mexico and Canada have more than doubled. This stands in stark contrast to projections that NAFTA would allow U.S. farmers to export their way to newfound wealth and farm income stability. Despite a 239 percent rise in food imports from Canada and Mexico under NAFTA, the average nominal U.S. price of food in the United States has jumped 67 percent since NAFTA.
  • The reductions in consumer goods prices that have materialized have not been sufficient to offset the losses to wages under NAFTA; U.S. workers without college degrees (63 percent of the workforce) likely have lost a net amount equal to 12.2 percent of their wages even after accounting for gains from cheaper goods.This net loss means a loss of more than $3,300 per year for a worker earning the median annual wage of $27,500.
  • The export of subsidized U.S. corn did increase under NAFTA’s first decade, destroying the livelihoods of more than one million Mexican campesino farmers and about 1.4 million additional Mexican workers whose livelihoods depended on agriculture. The desperate migration of those displaced from Mexico’s rural economy pushed down wages in Mexico’s border maquiladora factory zone and contributed to a doubling of Mexican immigration to the United States following NAFTA’s implementation.
  • Facing displacement, rising prices and stagnant wages, more than half the Mexican population, and more than 60 percent of the rural population, still falls below the poverty line, despite the promises that NAFTA would bring broad prosperity to Mexicans. Real wages in Mexico have fallen significantly below pre-NAFTA levels as price increases for basic consumer goods have exceeded wage increases. A minimum wage earner in Mexico today can buy 38 percent fewer consumer goods than on the day that NAFTA took effect. Despite promises that NAFTA would benefit Mexican consumers by granting access to cheaper imported products, the cost of basic consumer goods in Mexico has risen to seven times the pre-NAFTA level, while the minimum wage stands at only four times the pre-NAFTA level. Though the price paid to Mexican farmers for corn plummeted after NAFTA, the deregulated retail price of tortillas – Mexico’s staple food – shot up 279 percent in the pact’s first 10 years.

“Given NAFTA’s damaging outcomes, few of the corporations or think tanks that sold it as a boon for all of us in the 1990s like to talk about it, but the reality is that their promises failed, the opposite occurred and millions of people were severely harmed and now this legacy is derailing President Obama’s misguided push to expand NAFTA through the TPP,” said Wallach.

December 17, 2013

A Clean Energy Future or another Dirty Deal?

Last month, just before the international climate change conference in Warsaw, super typhoon Haiyan struck the Philippinnes as the strongest tropical typhoon to make landfall on record.  As Filipinos grappled with the death of thousands and displacement of millions, advocates and policymakers amplified their calls for the serious policy changes needed to curb greenhouse gas emissions and halt the march toward unmitigated climate change. 

This month, such climate change initiatives could be undermined by talks on a new U.S.-EU "trade" deal.  The leaked agenda for the deal reveals how it could not only constrain governments from taking new, bold action on climate change, but make it easier for fossil fuel corporations to roll back existing green policies. 

Negotiators from both sides of the Atlantic are converging in Washington, D.C. this week for a third round of talks on the Trans-Atlantic Free Trade Agreement (TAFTA).  What is TAFTA?  A “trade” deal only in name, TAFTA would require the United States and EU to conform domestic financial laws and regulations, climate policies, food and product safety standards, data privacy protections and other non-trade policies to TAFTA rules. 

We profiled recently the top ten threats this deal poses to U.S. consumers.  Here's a synopsis of how TAFTA's expansive agenda jeopardizes efforts to rein in the destructive effects of climate change. 

The EU/U.S. TAFTA Agenda: Deregulation in Disguise

U.S. and EU TAFTA negotiators, advised by the world’s largest oil and coal corporations, have used coded language in pushing for TAFTA rules that could roll back critical climate and energy initiatives such as:

  • Fuel efficiency standards: The U.S. and EU governments now are requiring automobile manufacturers to progressively boost fuel efficiency to meet emissions-reducing targets. But a leaked EU position paper reveals that EU negotiators are pushing for TAFTA to eliminate such mandatory standards: “Such standards ought in principle to be left voluntary, in order to allow sufficient flexibility for industry to choose the technical solution that best fits its needs.” That is, corporations should pick their own emissions standards.
  • Buy Green policies: Leaked EU procurement demands reveal that TAFTA could impose “disciplines” on environmental requirements that federal and state governments include in procurement contracts. Requirements that taxpayer-funded, government-purchased products be made according to low-carbon standards or that government agencies purchase a share of renewable-source energy, for example, could be exposed to challenge under the deal.  
  • Fracking regulation: A leaked EU position paper demands that TAFTA require “the elimination of export restrictions” for “natural gas” and other fossil fuels. Indeed, if TAFTA were to take effect, due to a decades-old loophole, the U.S. Department of Energy could lose its authority to determine whether exporting natural gas to the EU – the world’s largest natural gas importer – is in the public interest. A resulting surge in natural gas exports could raise energy prices for U.S. consumers and ramp up the chemical-laden practice of fracking, threatening our air and water.

Corporations’ TAFTA Agenda: Deregulation without Disguise

European and U.S. oil, auto, airline and other corporations, in their formal demands issued to TAFTA negotiators, have been remarkably candid in naming the specific U.S. and EU climate regulations that they would like to see dismantled:

  • Tar sands oil: To reduce greenhouse gas emissions of fuels used in road vehicles and non-road machinery, the EU Fuel Quality Directive sets reporting rules on fuel suppliers, including a requirement to report the lifecycle greenhouse gas emissions from supplied fuels. A proposed methodology for this lifecycle analysis would identify highly carbon-intensive fuel, such as that slated for shipment from Canadian tar sands to U.S. refineries, including potentially through the proposed Keystone XL pipeline. The American Fuel and Petrochemical Manufacturers, representing oil corporations such as Chevron and Exxon Mobil, explicitly requested that U.S. negotiators use TAFTA to halt the proposed EU tar sands standard, arguing that it “constitutes a discriminatory action against U.S. refiners.” That is, TAFTA should foreclose the use of policies to fully measure and better control emissions while expanding trade in dirty fossil fuels. U.S. Trade Representative Michael Froman has informed Congress that in TAFTA negotiations, “we continue to press the [European] Commission to take the views of stakeholders, including U.S. refiners, under consideration…”
  • Auto emissions: The EU and U.S. auto industries, represented by the American Automotive Policy Council and European Automobile Manufacturers Association, have stated that TAFTA negotiators (not the U.S. Congress and the EU Parliament) should have the power to create a new singular set of “environmental regulations.” They specifically recommend changing domestic regulations in “tailpipe criteria pollutants,” “diesel smoke,” and “real driving emissions” in a way that “could be beneficial for the industry.” 
  • Airline emissions: Airlines for America, the biggest U.S. airline industry association, has offered a list of "needless regulations [that] impose a substantial drag on our industry" – regulations that they hope can be dismantled via TAFTA. First on their list is the EU Emissions Trading Scheme, Europe’s central climate change policy, which required airlines to pay for carbon emissions. Airlines for America labeled the policy as a “barrier to progress,” asking that the program’s current temporary suspension be made permanent.  
  • Alternative fuels: BusinessEurope, representing European oil corporations such as BP, has asked that TAFTA be used to ban U.S. climate initiatives such as tax credits for alternative, climate-friendly fuels.  In its formal comments on TAFTA, under the heading of “Climate change and energy,” the business conglomerate states, “US fuel tax credits and Cellulosic Biofuel Producer Credit should become impossible in the future.”  The TAFTA-threatened tax credits incentivize producers to invest in algae-based and other emerging fuels that reduce carbon emissions.

Investor Privileges: Dirty Energy Corporations Empowered to Directly Attack Clean Energy Policies

U.S. and EU corporations and officials have called for TAFTA to grant foreign firms the power to skirt domestic courts, drag the U.S. and EU governments before extrajudicial tribunals, and directly challenge climate policies that they view as violations of TAFTA-created foreign investor “rights.” The tribunals, comprised of three private attorneys, would be authorized to order unlimited taxpayer compensation for domestic policies perceived as undermining the “expected future profits” of oil, gas, coal or nuclear firms. This is not a hypothetical threat. Under NAFTA, firms have filed such cases against a renewable energy feed-in tariff and a moratorium on fracking. The Swedish Vattenfall corporation has launched such attacks on Germany’s regulation of coal-fired electricity plants and phase-out of nuclear energy, demanding billions in compensation. Such extreme “investor-state” rules have already been included in U.S. “free trade” agreements, forcing taxpayers to pay corporations more than $400 million for toxics bans, land-use rules, regulatory permits, water and timber policies and more. Just under U.S. pacts, more than $14 billion remains pending in corporate claims against medicine patent policies, pollution cleanup requirements, climate and energy laws, and other public interest polices. The EU is proposing an even more radical version of these rules for TAFTA, offering firms a new tool to roll back climate policies.

Fast Track: Railroading Democracy to Railroad Safeguards?

How could a deal like TAFTA get past Congress? With a democracy-undermining procedure known as Fast Track – an extreme and rarely-used maneuver that empowered executive branch negotiators, advised by large corporations, to ram through unfair “trade” deals by unilaterally negotiating and signing the deals before sending them to Congress for an expedited, no-amendments, limited-debate vote. As a candidate, President Obama said he would replace this expired, anti-democratic process. But now he is asking Congress to grant him Fast Track’s extraordinary authority – in part to sidestep growing public and congressional concern about pacts like TAFTA. We must ensure that Fast Track never again takes effect and instead create an open, inclusive process for negotiating and enacting trade agreements in the public interest. 

December 11, 2013

Ecuador’s Highest Court vs. a Foreign Tribunal: Who Will Have the Final Say on Whether Chevron Must Pay a $9.5 Billion Judgment for Amazon Devastation?

Investor-State Tribunal of Three Private Lawyers Ignores Years of U.S. and Ecuadorian Court Rulings, Tries to Extinguish Indigenous Communities’ Rights to Sue Chevron for Contamination

Last month, after a legal battle spanning two decades and two countries, Ecuador’s highest court upheld a ruling against Chevron that found the U.S. oil giant responsible for the contamination of a Rhode-Island-sized section of Ecuador’s Amazon.  The court ordered Chevron to pay $9.5 billion, which would provide afflicted indigenous communities with the clean-up and health care they desperately need.

Chevron is seeking to evade this ruling by asking three private sector lawyers to second guess the decision of a sovereign nation’s legal system. 

Vaughan Lowe, Horacio Grigera Naón, and V.V. Veeder -- these are the three men who have assumed the authority to cast aside 20 years of litigation and court rulings against Chevron under two sovereign legal systems.  To consider jettisoning the $9.5 billion ruling against Chevron.  To order Ecuador’s government to violate its own Constitution and block enforcement of a ruling upheld on appeal in its court system.  And, in a decision in September, to declare that rights granted by Ecuadorian law do not actually exist

Under what country’s legal system do these three men assume such astounding power? 

None.  The three have made all of the audacious decisions above as members of an extrajudicial tribunal that sits outside of any legal system and is unaccountable to any electorate.  The men derive their sovereignty-trumping power from the “investor-state enforcement system” included in a Bilateral Investment Treaty (BIT) between Ecuador and the United States. 

Oil in AmazonThey recently set new standards of audacity by proclaiming that some of Ecuadorians’ legal rights to mount a case against Chevron were unwittingly and permanently extinguished by a contract signed years before between the government and Texaco Petroleum Co., which became a Chevron subsidiary in 2001.

In ruling that the government’s liability waiver also waived the rights of private parties to sue Chevron, the tribunal contradicted Ecuadorian court decisions on this very issue. In real courts, Chevron’s attempts to raise this improbable argument failedChevron hopes that the tribunal’s revival of this dead argument will lead the tribunal to order the taxpayers of Ecuador, an $84 billion economy –- not the shareholders of Chevron, a $231 billion business -– to pay billions to clean up the vast Amazonian pollution.

Background: After Losing in Domestic Courts, Chevron Turns to Foreign Tribunal to Evade Payment

For 26 years, Texaco, Chevron’s predecessor company, performed oil operations in Ecuador. Ecuadorian courts have found that during that period, the company dumped billions of gallons of toxic water and dug hundreds of open-air oil sludge pits in Ecuador’s Amazon, poisoning the communities of some 30,000 Amazon residents, including the entire populations of six indigenous groups (one of which is now extinct). 

For 20 years, those communities have sought a basic notion of justice –- water that is safe to drink, the clean-up of the rivers and land on which their lives depend, and healthcare for the many stricken with pollution-related illness. They have demanded that the corporation that devastated their lives, livelihoods, and ecosystem pay for rehabilitation.  For 20 years, Chevron has tried to evade justice, seeking to have the case dismissed in both the U.S. and Ecuadorian court systems.  The company lost issue after issue under both legal systems.  In 2011, after Chevron insisted that the U.S. case be moved to Ecuadorian courts, deemed Ecuador’s legal system “fair and adequate,” and committed to comply with a final court ruling there, an Ecuadorian court produced a $19 billion ruling against Chevron for the massive contamination.  In 2012 the ruling was upheld on appeal.  Last month’s ruling from Ecuador’s highest court upheld the judgment against Chevron, but halved the fine after overturning the lower court’s order of punitive damages against Chevron for misconduct during the trial and a refusal to apologize for its actions.

Instead of paying as agreed, after having lost in two countries, Chevron has turned to the country-less investor-state tribunal of Vaughan Lowe, Horacio Grigera Naón, and V.V. Veeder in its quest to evade justice.  How was this even possible?  Chevron claimed that the ruling issued in the Ecuadorian legal process, a process upon which Chevron had insisted, was a violation of extraordinary investor privileges enshrined in a U.S.-Ecuador Bilateral Investment Treaty (BIT)

Under the BIT, Chevron asked the three-person extrajudicial tribunal to order the Ecuadorian government to suspend enforcement of the multi-billion dollar domestic court ruling.  The tribunal granted that wish, ordering the government of Ecuador to violate its own Constitution, interfere with the independent judiciary, and somehow get it to stop the ruling.  Such a maneuver would breach Ecuador’s constitutionally-enshrined “separation of powers,” a legal concept that was probably not foreign to the panelists.  (Imagine a foreign extrajudicial tribunal ordering President Obama to suspend a U.S. Supreme Court ruling and you get the picture.)  Reasonably, the government decided to heed its Constitution rather than the three lawyers. 

Now Chevron is asking the same extrajudicial tribunal to order Ecuador’s taxpayers to hand over to the corporation any of the billions in damages it might be required to pay to clean up the still-devastated Amazon, plus all the legal fees incurred by the corporation in its efforts to evade justice.

Continue reading "Ecuador’s Highest Court vs. a Foreign Tribunal: Who Will Have the Final Say on Whether Chevron Must Pay a $9.5 Billion Judgment for Amazon Devastation?" »

September 27, 2013

Beware of Outlandish Claims About Economic Benefits of U.S.-EU ‘Free Trade’ Deal

This Week’s U.S. International Trade Commission Study Assumes Total Elimination of U.S.-EU Consumer, Environmental, Financial Policy Differences, Follows British Embassy’s 50-State Rehash of Discredited 2009 Study Based on Similar Assumption

On Thursday, the U.S. International Trade Commission (USITC) sent a report to the U.S. Trade Representative (USTR) on the projected economic impact of the Trans-Atlantic Free Trade Agreement (TAFTA), a report that is premised on the ridiculous assumption that 100 percent of the differences between U.S. and EU health, safety, environmental and financial regulations will be eliminated. Given that the report, which is not being made available to the press or public, relies on a premise that can only lead to fanciful results, U.S. negotiators should not consider it, much less use it to guide their approach to the agreement.

That study comes two days after yet another think tank report that recycled a litany of flawed assumptions from a 2009 study on TAFTA, chopping up baseless findings to present a 50-state version of imaginative projections of economic gains from a similar dismantling of public interest safeguards.

The core premise of these studies is the unproven business mantra that rolling back Wall Street reforms, food health standards and medicine safety regulations will somehow deliver economic gains to us all. The main contribution of the recent flurry of studies is the addition of extra gloss and fancy printing to the old, debunked assumption that such an assault on consumers, workers and the environment would have zero costs.

In its request for Thursday’s study, the USTR asked the USITC to assume an impossible outcome of U.S.-EU negotiations: “that any known U.S. non-tariff barrier will not be applicable” to imports from the EU if the sweeping deal were to take effect. By the USTR’s own definition, “non-tariff barriers” include differences in domestic financial regulations, food safety standards, product safety rules and other U.S. public interest safeguards that TAFTA apparently would render null. 

Even the most fanciful pro-TAFTA study, the 2009 ECORYS study prepared for the European Commission that has been regularly rehashed, including in a British Embassy report this week, avoided such an outlandish assumption, stating, “It is unlikely that all areas of regulatory divergence identified can actually be addressed … because this would require constitutional changes … ; because there is a lack of sufficient economic benefit to support the effort; …because of consumer preferences…; or because of political sensitivities.”

On Tuesday, the findings of the 2009 study were revived in another TAFTA-touting study, commissioned by the British Embassy in Washington, the Bertelsmann Foundation and the Atlantic Council. That glossy piece recycled the 2009 study’s improbable assumptions – breaking them down to state-by-state projections – to hypothesize the “gains” that TAFTA could deliver to each state if public interest safeguards were sufficiently weakened. The study assumes that TAFTA would eliminate one of every four “non-tariff barriers” – from the Volcker Rule at the center of Wall Street reform to safety standards for children’s toys to the U.S. ban on beef linked to mad-cow disease – at no cost to consumers.

While ignoring costs, the report uses a computable general equilibrium model to generate projections of hypothetical economic gains, despite studies showing that this methodology is inchoate and unreliable when studying non-tariff policies. Past studies using this cost-ignoring, gain-inflating methodology have still producedmeager projections for TAFTA’s “gains.” A pro-TAFTA study whose findings were recycled in Tuesday’s report estimated that, if TAFTA would significantly dilute or eliminate public interest regulations, the deal could produce a tiny 0.2 – 0.4 percent blip in U.S. gross domestic product (GDP). According to economists, that’s a smaller contribution to GDP than was delivered by the latest version of the iPhone

The list of “non-tariff barriers” slated for elimination in the underlying 2009 study includes food safety standards such as “Grade A dairy safety … rules and inspection requirements” for milk and financial stability measures such as the Sarbanes-Oxley Act that enacted accounting and anti-fraud standards to prevent a recurrence of Enron-like corporate accounting scandals. The study ignored the predictable social and economic costs that would result from such extreme regulatory rollback, such as an increase in the incidence of foodborne illness and a rise in financial instability.

Tuesday’s report, like its predecessors, made clear that TAFTA is not primarily about trade. Acknowledging that tariffs between the United States and the EU are “already quite low,” USTR and EU officials have made clear that TAFTA’s primary focus will be on the “elimination, reduction, or prevention of unnecessary ‘behind the border’” policies, such as the health, financial and environmental regulations targeted by Tuesday’s study. Attempts to exclusively measure the economic impact of TAFTA-prompted tariff reductions have produced embarrassingly meager results, estimating that even in the unlikely scenario of 100 percent tariff elimination, TAFTA would deliver economic benefits equivalent to three extra cents per person per day.

September 24, 2013

Gussying Up Old Assumptions: Today’s TAFTA-Touting Report Is a Re-Run

If you say something enough times, does it become true?  That seems to be the calculation of some proponents of the Trans-Atlantic Free Trade Agreement (TAFTA), a sweeping deal that would require the U.S. and EU to conform domestic safeguards to deregulatory rules currently being negotiated under corporate supervision.  Pro-TAFTA think tanks have been rehashing the same set of starry-eyed prognostications of TAFTA economic benefits at a frequency (and concern for accuracy) that rivals iterations of the “Fast and the Furious” movie series. 

But repetition does not truth make.  As we’ve pointed out time and again, these reports keep using sweeping assumptions to project that TAFTA would bring a surprisingly miniscule economic blip.  And to get that blip, they assume that we’ll be willing to watch corporate-advised TAFTA negotiators dismantle a swath of health, environmental, financial, and other safeguards.  Click here for our retort to this parade of studies. 

Another TAFTA-touting report came out today, commissioned by the British Embassy in Washington, the Bertelsmann Foundation, and the Atlantic Council (whose advisors include executives from J.P. Morgan and Big Pharma). 

The report offers 71 glossy pages of rewarmed speculations.  Here are the five main takeaways:

1. The “new” study is not really new.  It is largely a recycled version of another recycled version of a study that appeared in 2009.  Today’s report hypothesizes what TAFTA could mean for each U.S. state, assuming economic gains primarily from the weakening of financial regulations, climate policies, food and product safety standards, data privacy protections and other “trade irritants.” Those “gains” were tabulated about four years ago, dusted off in a study disseminated in March, and sliced up by state in today’s report.

2. The study confirms again that TAFTA is not about trade.  Since tariffs (an actual trade issue) are “already quite low” between the EU and U.S., pro-TAFTA government officials have readily stated that TAFTA’s primary goal is not tariff reduction, but the “elimination, reduction, or prevention of unnecessary ‘behind the border’” policies, ranging from Wall Street reforms to milk safety standards to GMO food labels. 

That’s why attempts to measure the economic impact of TAFTA-prompted tariff reductions have produced embarrassingly meager results.  A frequently cited pro-TAFTA study estimates that even in the unlikely scenario of 100% tariff elimination, TAFTA will deliver economic benefits equivalent to three extra cents per person per day.  To project a higher benefit, the study released today had to not just repeat this unrealistic assumption of 100% tariff reduction, but also assume that TAFTA would reduce health, financial and environmental regulations that have been euphemistically renamed “non-tariff barriers.” 

3. The study assumes zero downside of eliminating consumer and environmental safeguards. Today’s study assumes that TAFTA would eliminate one out of every four “non-tariff barriers” – from the Volcker Rule at the center of Wall Street reform to safety standards for children’s toys to the ban on beef linked to mad-cow disease – at no cost to consumers.  In addition to an obvious social and environmental toll, such a degradation of safeguards would also result in quantifiable monetary costs for U.S. consumers and the broader economy.

For example, the 2009 study on which today’s report relies counts “Grade A dairy safety…rules and inspection requirements” for milk and “a US ban on the import of uncooked meat products” in the case of “a health risk” as “non-tariff barriers” that could be slated for dismantling under TAFTA. The elimination of such consumer protections would likely result in greater incidence of food-borne illness in the United States, which would not only increase the medical costs of affected consumers, but would reduce their productivity levels and number of days at work, spelling a negative impact on aggregate economic output.

In financial services, the study names the Sarbanes-Oxley Act of 2002 as a “non-tariff barrier” on the target list of EU businesses and officials. The Act created enhanced accounting and anti-fraud standards to prevent a recurrence of the Enron, WorldCom, and other corporate accounting scandals that destroyed billions of dollars of U.S. investments. Undermining such critical financial reregulation via TAFTA would risk a return to such costly scandals. Today’s study ignored such costs.

4. The study uses contested models with assumptions that can turn economic losses into gains.  While ignoring costs, today's study strives to capture all theoreticaly plausible benefits by relying on assumptions-laden methods, such as using a computable general equilibrium (CGE) model to assess removal of “non-tariff barriers” (NTBs).  A U.N. study has questioned the reliability of this inchoate approach. It argues, “ongoing liberalization policy efforts to eliminate the restrictive effects of NTBs are proceeding with little economic analysis…the modeling of NTBs using general equilibrium modeling techniques is still in its early stages.” The U.N. study tested the usage of differing assumptions in a CGE model to estimate the economic effects of NTB removal and found that a change in the assumptions meant that the net economic effect of NTB removal actually switched from positive to negative for some countries (even before taking into account the above costs).  If today’s study performed any such testing of assumptions, it did not reveal the results. 

5. The study assumes a massive rollback of Buy American and Buy Local policies.  Another assumption of today’s study is that TAFTA would eliminate one half of all “procurement barriers,” a euphemism for popular policies like Buy American and Buy Local to ensure that U.S. government projects, funded by U.S. taxpayers, are used to create U.S. jobs.  It is rather fanciful to think that the U.S. Congress, state legislatures, or the U.S. public would accept such a clear-cutting of policies that enjoy 90% support.  Indeed, today’s study assumes an even greater undercutting of Buy American and Buy Local than the EU negotiators themselves are hoping for. In a leaked EU position paper on government procurement, the EU explicitly names 13 U.S. states and 23 U.S. cities it is targeting for rollback of Buy Local policies.  Today’s study assumes that the U.S. will offer to eliminate Buy Local in about twice as many states as the EU itself requested.

For more information on the lineage of TAFTA-touting studies from which today’s rosy report descended, click here to see our factsheet.  

August 14, 2013

Video: "Peril in the Pacific" Spotlights TPP's Dangerous Investor Privileges

Friends of the Earth, U.S. has released a video highlighting the threat that the Trans-Pacific Partnership (TPP) poses to the environment and human rights. Check out the video below to learn more about how the TPP's investment chapter (a draft of which has leaked) favors corporations over people and the environment by allowing comapnies to drag a government to an extrajudicial tribunal if they feel that a public interest law has affected their ability to make a profit.

July 12, 2013

Obama Administration Stands Firm on ‘Dolphin-Safe’ Tuna Labels; Will the WTO Authorize Trade Sanctions?

In Round 3 of Epic WTO v. Flipper Case, Mexico Hints That It Will Seek Trade Sanctions Against U.S. Over Response to Latest WTO Ruling Against Popular Dolphin-Safe Labels

In a creative response to a 2012 World Trade Organization (WTO) ruling, the National Oceanic and Atmospheric Administration (NOAA) has issued a new regulation supported by Public Citizen that strengthens the criteria for dolphin-safe labeling. Mexico, which challenged the policy, sought a rollback of the labeling program and has indicated that it may challenge the new regulation and seek WTO authorization to impose trade sanctions against the United States.

NOAA’s welcome announcement puts the spotlight back on the WTO, which must decide if it will accept the policy as meeting WTO rules or continue its legacy of undermining dolphin protection.

A U.S. ban on the sale of tuna caught with dolphin-deadly purse seine nets was gutted in 1997 after 1991 and 1994 trade challenges by Mexico and other nations. The ban was enacted after six million dolphins were killed by the nets. Outrage over the rollback triggered a new era of trade activism. Mexico’s latest challenge targeted the voluntary labeling policy that replaced the ban on dolphin-deadly tuna. This market-oriented approach provides consumers with information so they can decide if they prefer dolphin-safe tuna.

“Public Citizen applauds NOAA’s approach, which breaks with years of the U.S. government weakening consumer and environmental policies attacked at the WTO,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “We are now left to wait and wonder if the WTO will continue its anti-environmental, anti-consumer rights legacy or finally side with Flipper and consumers’ right to make informed decisions about the food we purchase.”

In a controversial move, the WTO ruled in 2012 that the U.S. labeling program, for which many countries’ tuna qualifies, violated WTO non-discrimination rules because tuna caught in the Eastern Tropical Pacific (ETP) had to meet additional criteria to qualify for the label. The ETP is the only region where dolphins are known to congregate above schools of tuna. Thus, dolphin-safe criteria for that region are set by the Inter-American Tropical Tuna Commission (IATTC), an international body that includes Mexico, and apply to all fishers operating there.

The U.S. labeling regime is voluntary. If U.S. or Mexican fishers choose to use the dolphin-safe methods stipulated by the regime, their tuna qualifies for U.S. dolphin-safe labels. Tuna not meeting the standard can be sold in the United States without the label. U.S., Ecuadorean and other tuna fleets chose to meet the dolphin-safe standard. After decades of refusing to transition to more dolphin-safe fishing methods, Mexico challenged the labeling program at the WTO. The WTO ruled against the policy even though the same standards applied to U.S. fishers, though the alleged discrimination resulted from Mexican fishers’ decision not to meet the standard, and though Mexican tuna could be sold in the United States without the dolphin-safe label.

NOAA’s new policy, supported by Public Citizen and other consumer and environmental groups, addresses the discrimination claim by strengthening the criteria used to assure that tuna caught in other regions and sold under the dolphin-safe label is caught without injuring or killing dolphins. Even before this improvement, the labels contributed to a more than 97 percent reduction in tuna-fishing-related dolphin deaths in the past 25 years. The labels allow consumers to “vote with their dollars” for dolphin-safe methods.

Mexico has stated that it is “analyzing all the available legal mechanisms” to push the United States to alter its response, which includes requesting WTO authorization to impose trade sanctions against the United States. WTO approval of such sanctions would continue the saga of WTO interference with countries’ environmental policies and reinforce the anti-WTO public sentiment spurred by last year’s spate of anti-consumer WTO rulings. In April 2012, the WTO ruled against the Obama administration’s flavored cigarettes ban used to curb youth smoking, and in June 2012 it ruled against the popular U.S. country-of-origin labeling (COOL) program used to inform consumers where their meat comes from.

If the WTO decides that the new policy does not meet its requirements, Mexico can impose trade sanctions against the United States until the policy is altered to the WTO’s satisfaction. If sanctions are authorized, the administration may find the best response to be maintaining the new regulation and negotiating a settlement with Mexico. This was the European Union’s approach after a WTO ruling against its ban on artificial beef hormones that is widely popular with consumers. U.S. environmentalists have won repeated court cases stopping attempts by the George W. Bush and Clinton administrations to weaken the regulations defining the criteria for obtaining a dolphin-safe label under the current law. Thus, absent a negotiated settlement, the administration would face the prospect of having to seek a congressional rollback of a widely popular law, effectively asking Congress to feed Flipper to the WTO.

“The troubling trend of repeated successful WTO attacks against America’s dolphin protection and consumer information policies shows how the terms of our current ‘trade’ agreements can undermine core environmental and consumer safeguards,” said Wallach. “As the Obama administration now seeks to expand the same sort of rules in new Trans-Atlantic and Trans-Pacific pacts it is negotiating, the public is taking note.”

June 17, 2013

Amid G8 Hoopla, Much-Hyped U.S.-EU Deal Hits Snags Before Negotiations Even Start

Projections of Pact’s Boost to Economic Growth Inflated, While Contentions over Data Privacy, Food Safety and Other Issues Exacerbated by Recent Developments

In the wake of President Barack Obama’s announcement at the G8 Summit of the imminent launch of negotiations on the Trans-Atlantic Free Trade Agreement (TAFTA), the benefits of such a deal remain in question. Further complicating the pact are rifts between EU member states on its contents, recent U.S. revelations about the National Security Agency’s indiscriminate collection of private data, and wheat supplies contaminated by unapproved genetically modified organism (GMO) varieties.

Tariffs between the United States and the EU are already quite low, thus projections of gains from this deal rely on hypothetical efficiency gains from changes to domestic regulatory standards. Yet, even studies used to project a “benefit” from the deal indicate that neither consumers nor legislators would allow most food safety standards, financial stability measures and environmental protections to be dismantled in the name of reducing “barriers.” France’s recent stand on preserving its cultural promotion policies that resulted in the sector being excluded from the EU’s negotiating mandate for the talks is an example of the obstacles corporations face in trying to remove many non-trade domestic policies. Those studies, however, do not take into consideration the economic and social costs of rolling back the long list of health, environmental and consumer safeguards targeted by the multinational corporations now driving the trade agreement’s agenda.

“The claims that this deal will somehow be an economic cure-all and generate significant growth are simply not supported by any reliable evidence, but we do know that the talks are based on the demands of U.S. and EU corporations that have been pushing for decades to eliminate the best consumer, environmental and financial standards on either side of the Atlantic,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “This ‘deal’ is shaping up to be just another vehicle for the largest U.S. and EU corporations to sneak in provisions they cannot enact through open democratic processes and leave citizens exposed to another financial crisis, unsafe foods and severe burdens on Internet freedom and innovation.”

Studies projecting efficiency gains from TAFTA have employed theoretical models that, according to the U.N., rest on “strong assumptions” that when modified can cause the theoretical gains to disappear. Meanwhile, actual empirical evidence from prior attempts at “non-tariff barrier” elimination has indicated negligible efficiency gains. Certain costs and uncertain benefits spell a net loss to the economy from any deal targeting critical safeguards.

The use of GMOs in the United States has long been a contentious U.S.-EU trade issue, but now faces growing scrutiny after the discovery of unapproved genetically modified wheat in Oregon. The revelation has made European consumers, already averse to genetically altered foods, all the more resistant to the calls of U.S. agribusinesses to reduce or eliminate European restrictions on GMOs via TAFTA.

Another point of controversy remains telecommunications security. As Deputy United States Trade Representative Michael Punke noted, the NSA’s indiscriminate spying on customers’ telephone records will make negotiations with the EU, whose data privacy protections are significantly more rigorous than those in the U.S., much more difficult. EU law requires U.S. corporations to meet seven privacy criteria before transferring Europeans’ phone, health and financial records to the United States, in part due to (now confirmed) fears that the U.S. government could access the private data.

In addition, the deal’s proposed expansion of the notorious “investor-state” system would empower foreign corporations to skirt U.S. legal systems and directly challenge domestic health, environmental and other public interest policies before extrajudicial foreign tribunals authorized to order taxpayer compensation. After U.S. Rep. Alan Grayson (D-Fla.) sent a single email to supporters last month to alert them to this extreme provision, about 10,000 people lambasted the investor privileges within 32 hours in comments to the Obama administration. The flood of concern signaled the public outcry that should be expected if U.S. negotiators pursue the expansion of investor privileges through TAFTA, Wallach said.

May 09, 2013

Bloomberg: "Coup d’Etat to Trade Seen in Billionaire Toxic Lead Fight"

Percy Ramírez - Oxfam America
Percy Ramírez / Oxfam America

Today, Bloomberg published an in-depth piece highlighting the secretive public policy “coup d’etat” that allows corporations to use trade agreements to attack domestic health, environmental, and other public interest policies they feel undermine their ability to make a profit. The use of this "investor-state" system, which was once considered a last resort for companies that had been wronged by countries with weak legal infrastructure, has exploded in recent years as a first-resort way to circumvent strong domestic legal systems. In 2012, corporations used the system to launch a record-breaking 62 new cases against sovereign governments.

Outlined in the article are some of the most egregious cases, including that of Doe-Run/Renco, the company that, after refusing to fulfill its contractual obligations to clean up the pollution of a lead smelter that caused lead poisoning in 99.7% of the community’s children, is now suing Peru under the Peru-U.S. "free trade" agreement (FTA) for $800 million. The story also mentions the record-breaking $1.8 billion judgment that Occidental Petroleum Corp. won against Ecuador last year -- a staggering penalty imposed on Ecuador's taxpayers that amounts to 16% of the country’s external debt.

As the number of investor-state cases balloons, more and more countries are expressing concerns and opting out of investor-state provisions. Despite U.S. pressure, Australia has refused to be a party to the investor-state provisions in the Trans-Pacific Partnership (TPP).  In April, 12 Latin American governments met at a summit focused on investor-state concerns, resulting in a declaration by seven of the governments to coordinate efforts to replace the investor-state regime.  Bolivia and Venezuela have already pulled out of the International Centre for Settlement of Investment Disputes (ICSID), and in March, Ecuador moved to annul its Bilateral Investment Treaty (BIT) with the US.  Other countries such as Brazil, India, and South Africa have either outright rejected the investor-state regime or have made strides to abolish investor-state clauses. Hopefully, these steps forward, combined with increased media attention, will motivate more countries to discard harmful investment provisions that threaten crucial environmental, health, and regulatory policies aimed at improving the lives of the majority.  

Click here to check out the full Bloomberg article.

May 07, 2013

Public Citizen and Sierra Club Denounce World Trade Organization Attack on Successful Clean Energy Program

In Final Appeals Ruling, WTO Orders Canada to Roll Back Green Jobs Program

A World Trade Organization (WTO) final ruling against Ontario’s successful renewable energy incentives program, which has reduced carbon emissions and created clean energy jobs, underscores the threat the WTO poses to a clean energy future, Public Citizen and Sierra Club said today.

In November 2012, the WTO ruled that Ontario’s incentives program for renewable energy companies at home – or “feed-in tariff” program – violates WTO rules that forbid treating local or domestic firms and products differently from foreign firms and products. On Monday, the WTO struck down Canada’s appeal of that initial ruling in a decision that went even further to condemn the green jobs program as a violation of WTO rules.

“By ordering the rollback of a successful program that is reducing carbon pollution and creating green jobs after recently sacking three popular U.S. consumer protection policies, the WTO is destroying whatever shred of legitimacy it still had after years of imposing its anti-consumer, anti-environment dictates,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Just like the WTO rulings ordering the U.S. to gut popular laws on country-of-origin meat labels, dolphin-safe tuna labels and limits on candy-flavored cigarettes marketed to kids, this latest attack against an initiative promoting renewable energy, localization and green job creation is simply unacceptable.”

Ontario’s renewable energy incentives program was established under the Green Energy and Green Economy Act of 2009. It increases incentives to develop clean and safe renewable energy by guaranteeing that the provincial public electricity utility, Ontario Power Authority, will pay a preferential price for 20 years to companies for the wind, solar and other clean energies they produce. Although the program is new, it already has achieved significant success, including contracts for an estimated 4,600 megawatts worth of clean energy and the creation of more than 20,000 jobs in just two years.

“As people around the world grapple with consequences of the climate crisis, their governments should and must use every tool available to reduce dangerous carbon pollution and create new clean energy jobs,” said Ilana Solomon, Sierra Club trade representative. “To avoid climate chaos, the WTO needs to get out of the way of innovative and successful climate solutions and job creators.”

The Sierra Club and Public Citizen support calls of Canadian allies, including the Council of Canadians, to keep Ontario’s renewable energy incentives program in place.

April 12, 2013

Businesses Crowd Corporate-Hosted Government Hearing on Trans-Atlantic "Trade" Deal

As the Obama Administration gets ready to negotiate a Trans-Atlantic "Free Trade" Agreement (TAFTA) with the European Union that takes aim at a host of health, financial, environmental and other regulations, a smorgasbord of corporate representatives (and a sprinkling of consumer groups) voiced their wishes for the pact this week. The occasion was a standing-room-only "stakeholder session," hosted by the administration's Office of Management and Budget and the European Commission, to get input on what TAFTA should or should not entail.  

What neutral territory did the administration choose to consider such a critical question?  Perhaps one of the many government-owned venues in downtown DC?  Nope.  They went with the headquarters of the Chamber of Commerce.  The Chamber's not exactly a disinterested party in a pact that could implicate a wide swath of U.S. regulation used to balance big business's quest for profits with the public's quest for financial stability, a healthy environment, safe products, and affordable medicines.  The venue choice is akin to the Environmental Protection Agency hosting a forum on offshore drilling...on an offshore drill.  

But at least the administration granted public interest groups like us some time to offer input.  As in, a half hour.  Total.  For all consumer groups.  In a 1.5-day-long forum otherwise filled almost exclusively by industry representatives.  If relative allotment of time is indicative of the relative importance the administration attributes to industry views on TAFTA vs. the views of everyone else, big business "stakeholders" hold 76% of the administration's attention, technical standards organizations hold 11%, and the opinions of the rest of us are worth 13%. 

During that half hour, I squashed Public Citizen's initial take on TAFTA, one of the largest "trade" deals proposed to date, into a five-minute statement.  For a nutshell view of what's at stake in TAFTA, here's the statement:

Continue reading "Businesses Crowd Corporate-Hosted Government Hearing on Trans-Atlantic "Trade" Deal" »

March 01, 2013

The Obama Administration Wants to Sell You a Used Trade Policy

The Office of the U.S. Trade Representative (USTR) just released the 2012 annual trade report and 2013 trade agenda of the President.  It reads a bit like a used car salesman trying to do his best with a lemon.  The report/car’s well-polished sheen looks pretty… until you take a peek under the hood. 

Take the first sentence: “Trade is helping to drive the success of President Obama’s strategy to grow the U.S. economy and support jobs for more Americans.”  Almost makes you forget that last year’s non-oil trade deficit rose to a five-year high, implying the loss of millions of jobs, doesn’t it?  How about the second sentence: “The Obama Administration’s trade policy helps U.S. exporters gain access to billions of customers beyond our borders to support economic growth in the United States and in markets worldwide.”  That’s an interesting way to frame a year whose sluggish two percent export growth rate put us 18 years behind schedule in achieving Obama’s export-doubling goal.  The report continues on with its pitch, trying its darndest to pretty up what amounts to a year of ugly trade policy impacts for workers and consumers, and what appears to be more of the same planned for the 2013 trade agenda. 

Before you buy this “certified pre-owned” trade policy, let us help interpret some of the report's glossy claims:

Fast Track

The report’s first page features these two sentences: “To facilitate the conclusion, approval, and implementation of market-opening negotiating efforts, we will also work with Congress on Trade Promotion Authority. Such authority will guide current and future negotiations, and will thus support a jobs-focused trade agenda moving forward.”  Those lines have prompted a frenzy of press speculation that the Obama administration could ask Congress for Fast Track, the controversial tool that presidents from Nixon to Bush II have used to seize Congress' constitutional prerogative to set trade policy.  Fast Track has been newly euphemized as "Trade Promotion Authority." (It's not a "clunker," it's a "mechanic's dream.")  Much of the press hubbub has been over whether or not Congress would or should revive the "politically contentious" Fast Track authority for Obama. But that's not the right question. We should be asking: what kind of trade negotiating system should replace Fast Track?  It's time for a modern, democratic trade negotiating process to replace an autocratic Fast Track system that predates disco. 

It's interesting that the administration decided to devote two lone sentences to Fast Track in a 382-page report. Why not be more forthright in heralding a new push for Fast Track?  Because when asking for something unpopular, it makes sense to whisper.  And Fast Track is vastly unpopular.  Before being allowed to die in 2007, Fast Track was a Nixon-conceived attempt to sidestep checks, balances and other pesky features of a democratic republic by taking from Congress its Constitution-granted prerogative to determine trade policy. In one fell swoop, Fast Track 1) delegated away Congress’ authority to choose trade partners and set the substantive rules for “trade” pacts that have deep ramifications for broad swaths of non-trade domestic policy, 2) permitted the executive branch to sign and enter into FTAs before Congress voted on them, 3) forced a congressional vote on FTAs, and 4) suspended amendments and truncated debate when that vote occurred.  It was under this legislative luge run that we got NAFTA, CAFTA, the Korea FTA, etc.  Fast Track's extreme approach has created many an opponent (right, left, and center), spurring politically costly battles for past presidents that have attempted to wrest the unpopular authority from Congress.  

If Fast Track carries such political liability, why is the Obama administration pursuing it?  Well, according to today's report, it's to “facilitate” the passage of FTAs like the TPP (see below).  But if the TPP is such a “high-standard” agreement, what’s the harm in letting Congress get a good look at it, rather than handcuffing their involvement with Fast Track?  Doing so would save Obama the political grief of a Fast Track fight.  Or maybe there’s something even more objectionable about the TPP itself that requires Fast Track’s unparalleled sequestration of congressional power to get the deal enacted?  

Again, the choice is not Fast Track or no Fast Track.  It's Fast Track or a sensible model of trade policymaking for a modern democracy.  A new model of delegated authority would respect Congress' responsibility to play the lead role in determining the outcome of “trade” deals that intend to rewrite policies regarding financial regulation, immigration, climate and energy policy, healthcare, food safety, etc.  

Trans-Pacific Partnership

USTR reiterates throughout the report its standard definition of the Trans-Pacific Partnership (TPP) as “a high-standard regional trade agreement that will link the United States to dynamic economies throughout the rapidly growing Asia-Pacific region.” (italics added)  The primary problem with this pitch is that we’re already quite linked with these economies -- as in, 90 percent linked.  The United States already has trade deals with six of the seven largest TPP negotiating economies, which constitute 90 percent of the combined GDP of the negotiating bloc.  The TPP “dynamic economies” with which we don’t already have liberalized trade include Vietnam, where annual income per person is $1,374, and Brunei, which has a population smaller than Huntsville, Alabama.  As we’ve said time and again, this deal is not primarily about trade. 

What is it about?  It's about banning Buy American policies that support U.S. jobs; discreetly enacting provisions of the congressionally-defeated, Internet-freedom-threatening Stop Online Piracy Act; restricting safety standards for imported food; empowering foreign investors to directly challenge governments’ public health and environmental policies while demanding taxpayer compensation for “expected future profits;” counteracting efforts to reregulate Wall Street; giving pharmaceutical corporations better tools to undermine drug cost containment policies; and more.  USTR appears to have omitted such details in today's report.   

Under a section entitled “Inclusion of stakeholders at Trans-Pacific Partnership negotiations,” USTR boasts that “Stakeholder engagements and briefings provided an opportunity for the public to interact with negotiators from all of the participating countries and provide presentations on various trade issues, including public health, textiles, investment, labor and the environment.”  We have indeed given such presentations…while TPP negotiators were simultaneously scheduled to be on the other side of the negotiating venue.  It’s hard to engage trade negotiators who are supposed to be in two places at once.  We do appreciate the attempt at engagement, but would appreciate a more concerted effort

After patting its back for being “open” and having “unprecedented direct engagement with stakeholders,” USTR includes this: “At the same time, the Administration will vigorously defend and work to preserve the integrity of confidential negotiations, because they present the greatest opportunity to achieve agreements that fulfill U.S. trade negotiation objectives.”  Here USTR is trying to explain the equivalent of a used car's missing motor: an unbending commitment to not release the TPP negotiating text.  While claiming “unprecedented” engagement with stakeholders, USTR’s decision to keep the TPP negotiating text secret from the public, the press, and even congressional offices is “unprecedented” among 21st-Century trade deals of this scope.  The World Trade Organization (WTO), hardly a paragon of transparency, posts key texts online for public review. In addition, when the last major regional “trade” agreement (the Free Trade Area of the Americas) was at the same stage as the TPP is now, the text was formally released by the U.S. and other negotiating governments (in 2001). It’s hard to claim genuine engagement with stakeholders when those stakeholders cannot see the thing in which they hold such a stake. 

Trans-Atlantic FTA

The report reiterates President Obama’s State of the Union surprise: that the United States intends to not just negotiate a NAFTA-style pact spanning the Pacific (the TPP), but also one spanning the Atlantic. In brief discussion of the Trans-Atlantic FTA (TAFTA), the report says, “Such a partnership would include ambitious reciprocal market opening in goods, services, and investment, and would offer additional opportunities for modernizing trade rules and identifying new means of reducing the non-tariff barriers that now constitute the most significant obstacle to increased transatlantic trade.”  But this deal, even more than most, is not about trade.  Says who?  USTR itself.  U.S. Trade Representative Ron Kirk, in a briefing on the deal said that the administration has resisted including the word “trade” in the name of the deal “because it is so much broader than trade.” 

With tariff levels already quite low between Europe and the United States, this FTA appears to be primarily about those “non-tariff barriers” standing in the way of “regulatory coherence.”  What might such opaque terms mean?  In the past, they have been code for a lowest-common-denominator approach to reducing all those safety, environmental, health, financial stability and other domestic regulations that corporations have not been able to roll back via domestic pressure.  “Trade” deals provide a handy forum in which to write binding rules that contravene such regulations.  What regulations in particular might be on the hoped-for chopping block?  European firms have already taken aim at U.S. financial regulations, while U.S. corporations have long been annoyed by Europe’s tougher policies against unsafe food, GMOs, and carbon emissions.  Big agribusiness, oil and gas, chemical, and financial firms on both sides of the Atlantic may be hoping to undermine such policies in a new TAFTA, to the detriment of, well, just about everyone else. 

Exports and Jobs

The report informs the reader that “Data from 2012 showed that every $1 billion in U.S. goods exports supported an estimated nearly 5,400 American jobs...”  Good to know.  What about an additional $1 billion in imports?  As per usual, USTR trumpets the gains of exports without looking at the other side of the trade equation.  In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically occurred last year.  The non-oil U.S. deficit in goods rose six percent in 2012 to $628 billion, the largest non-oil U.S. trade deficit in the last five years.  According to the Obama administration’s own math, that degree of negative net exports implies the loss of 3.4 million jobs.  That data from 2012 didn’t make it into the report. 

Readers of Eyes on Trade know that U.S. exports to Korea under the Korea FTA have been faring particularly poorly: they fell 10 percent in 2012 after the deal took effect (compared to the same months for 2011).  How did USTR deal with this inconvenient truth in its annual report?  It didn’t.  With respect to the three FTAs implemented in 2012, the report states “…in 2013 we will work with Korea, Colombia, and Panama to ensure that the bilateral trade agreements that went into effect last year continue to operate smoothly…”  A ten percent fall in exports for a deal that was sold under the unrelenting promise of “More Exports. More Jobs?”  Real smooth.  It seems that these are not the things one mentions in an annual report when one’s accompanying agenda for the next year includes more of the same FTAs (e.g. TPP), sold under the same “More exports. More jobs” pitch.   

Buy American and Green Procurement Policies

Wonder why our exports and job growth has been so sub-par recently?  USTR thinks it has found the answer—that scourge of our economic woes called “localization.”  Here’s what the report has to say on the topic: “We are also actively combating “localization barriers to trade” – i.e., measures designed to protect, favor, or stimulate domestic industries, service providers, and/or intellectual property (IP) at the expense of goods, services, or IP from other countries…Localization barriers to trade that present significant market access obstacles and block or inhibit U.S. exports in many key markets and industries include: requiring goods to be produced locally; providing preferences for the purchase of domestically manufactured or produced goods and services; and requiring firms to transfer technology in order to trade in a foreign market…Building on progress made in 2012, the localization taskforce will coordinate an Administration-wide, all-hands-on-deck approach to tackle this growing challenge in bilateral, regional, and multilateral forums…” 

Before the USTR dedicates the few hands it has on deck to scour the globe for pernicious localization policies, it might want to check out a few of our own.  Namely, Buy American.  This program, widely-supported among Republicans, Democrats and independents, provides a textbook example of USTR’s definition of a “localization barrier.” Buy American explicitly “provides preferences for the purchase of domestically manufactured or produced goods,” by requiring that U.S. tax dollars be spent on domestic firms when the U.S. government purchases construction equipment, vehicles, office supplies, etc.  Did USTR have in mind the elimination of this job-supporting program? Their trade agenda would certainly indicate so –- the TPP and other FTAs ban the Buy American treatment for any foreign firms operating in new FTA partner countries. 

“Localization” also implicates Buy Local and other green procurement policies that governments are increasingly using to transition to a greener economy.  Ontario, for example, has employed a renewable energy program that requires energy generators to source solar cells and wind turbines from local businesses so as to cultivate a robust supply of green goods, services, and jobs.  The program has earned acclaim for its early success in generating 4,600 megawatts of renewable energy and 20,000 green jobs.  But one group hasn’t had much acclaim to offer: the WTO.  In a ruling at the end of last year, the WTO decided that the successful program’s local requirements violate WTO rules.  Today's report confirms indications that USTR now also intends to take on such climate-stabilizing “barriers to trade." Last month, the United States initiated a WTO case against India, attacking buy-local components of its solar energy policy.  A refurbished trade agenda that undermines an urgently-needed clean-energy agenda?  Sounds like a lemon. 

October 23, 2012

Tribunal Slams Ecuador with Largest Ever Investor-State Penalty

We were astounded to learn earlier this month that a three-person ICSID tribunal has imposed on Ecuador a $1.8 billion judgment, the largest investor-state award to ever come out of the private forum.  Having had a chance to look at the sovereignty-defying leaps of logic that the tribunal used to determine that Ecuador should pay the mammoth sum to U.S.-based Occidental Petroleum (Oxy), we’re even more appalled. 

Oxy launched the case against Ecuador under the U.S.-Ecuador Bilateral Investment Treaty (BIT).  Last week, we reported that Chevron is attempting to use this same NAFTA-style treaty to evade an $18.2 billion ruling for decades of pollution in Ecuador’s Amazon.  While the second-largest U.S. oil corporation (Chevron) is using the BIT’s extreme investor-state system to run from billions in damages inflicted upon Ecuador, the fifth-largest U.S. oil corporation has just employed the same system to extract nearly two billion from the country.  It seems that Big Oil has chosen private investor-state tribunals as the preferred arena in which to attack Ecuador as its preferred punching bag. 

In addition to awarding $1.8 billion of Ecuador’s tax dollars to Oxy as the principal amount, the tribunal in Oxy v. Ecuador  ordered Ecuador to pay $589 million in backdated compound interest, plus post-award interest and half of the costs incurred by the tribunal itself (para. 876).  In sum, the tribunal handed Ecuador a penalty of at least $2.4 billion.  What does $2.4 billion mean to Ecuador?  That amounts to 16% of the country’s external debt and 11% of all goods exported in one year.  In more human terms, the financial drain is equivalent to the combined annual income of the poorest 20% of Ecuadoreans--nearly 3 million people.  Even at the average income level, the tribunal’s penalty amounts to the total income of a share of the country that’s equivalent, in U.S. terms, to the combined populations of New York and Los Angeles.  Of course, it’s the Ecuadorean government who will have to figure out how to finance the $2.4 billion, which is the same amount that it spends on health care each year for over seven million Ecuadoreans-- almost half the population. 

What events could have prompted such a massive judgment?  In May 1999, Oxy signed a 20-year contract with Ecuador and the state oil company to explore for oil in Block 15, a segment of Ecuador’s Amazon, and extract from any discovered reserves (paras. 112, 115).  In exchange for taking on all expenses, Oxy was contractually entitled to 70% of the oil produced, with Ecuador maintaining a right to the rest (para. 117).  The contract also stipulated that while Oxy could sell the oil, it could not sell off any portion of its rights to produce and profit from the oil without government authorization.  The contract stated that transferring the rights to the oil production without authorization “shall terminate” the contract, meaning legal annulment and forfeiture of investments (para. 119).  This provision explicitly enforced Ecuador’s hydrocarbons law, which protected the government’s ability to vet companies seeking to gain control over oil production in its territory, a particular concern in the Chevron-ravaged Amazon region (para. 121). 

One year after signing the contract, Oxy sought to sell off a portion of its investment in Block 15 oil production so as to gain capital and reduce expenditure risks.  In October of 2000, it signed with the Alberta Energy Company (AEC, a Canadian firm) a contract in which Oxy kept “nominal legal title” to the oil production contract with the government, but AEC purchased 40% of Oxy’s oil rights and agreed to foot 40% of ongoing costs (paras. 128, 129).   The two companies formed a “Management Committee” comprised of one AEC representative and one Oxy representative with the “power and duty to authorize and supervise Joint Operations” (para 136).  Oxy mentioned the deal to the government, but neither presented the contract nor sought government authorization for AEC’s acquisition of a significant economic and operational stake in the Amazonian oil project (paras. 147-160). 

After an audit of Oxy in 2004, Ecuador’s Attorney General determined that the confidential Oxy-AEC contract in 2000 had bypassed necessary government authorization and thus violated Oxy’s contract with the government, prompting him to initiate a process to annul it (para. 177).  In May 2006, after a long delay filled with a presidential ouster and political tumult, the government terminated the contract with Oxy and repossessed the land and oil equipment of Block 15 (paras. 199, 200). 

How did the tribunal, reviewing this evidence, determine that Ecuador should pay Oxy the largest ICSID tribunal-decided sum in history?  With 326 pages of logical gymnastics.  The tribunal found that Ecuador had violated its BIT obligation to provide Oxy with “fair and equitable treatment,” the single most successful investor claim in the NAFTA-style investor-state system.  To get there, the tribunal’s arguments took numerous turns, often defying Ecuador’s sovereignty, common sense, or both.  I summarize below five of the most troubling arguments, presented in reduced arithmetic form to underscore the tribunal’s “logic.”

 

Continue reading "Tribunal Slams Ecuador with Largest Ever Investor-State Penalty" »

October 16, 2012

U.S. Supreme Court Refuses to Hear Chevron's Case to Block $18.2 Billion Penalty for Amazon Pollution

In the most recent development in the historic case against Chevron’s appalling pollution in the Amazon, the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling last week.  In so doing, the Supreme Court produced yet another denial of the company’s attempt to block an $18.2 billion dollar judgment against the company in Ecuador. Chevron is trying to avoid paying the judgment that resulted from a successful lawsuit filed in Ecuador by residents of Lago Agrio in the Ecuadorian Amazon for massive contamination of the region between 1964 and 1992.

Earlier this year, the U.S. Second Circuit Court of Appeals threw out a ruling by a federal judge in New York, which had temporarily blocked enforcement of the judgment.  The appellate court asserted that U.S. law does not permit “disappointed litigants in foreign cases” to ask the court to “restrain efforts to enforce those foreign judgments against them, or to preempt the courts of other countries from making their own decisions about the enforceability of such judgments.”  The appellate court chastised the lower court’s attempt to block the Ecuadorean judgment, saying the move “risks disrespecting the legal system” of Ecuador and wrongly presumes that a U.S. court can act as “the definitive international arbiter of the fairness and integrity of the world’s legal systems.”  The U.S. Supreme Court’s decision to not hear Chevron’s appeal suggests that they did not see a compelling reason to question the appellate court’s reasoning.  

Despite having lost on the merits in the highest courts in Ecuador, and having been continually thwarted by U.S. courts in its attempts to halt enforcement, Chevron is not finished with its threat of a “lifetime of appellate and collateral litigation” to avoid complying with the judgment. The company is using the extreme foreign investor rights in the U.S.-Ecuador Bilateral Investment Treaty (BIT) to continue its campaign to evade justice via an "investor-state" case to be decided by an ad hoc tribunal of three private lawyers.

This is not the only instance of corporations using international trade and investment pacts to bypass the justice system of sovereign nations. In August, the Australian High Court (equivalent to the U.S. Supreme Court) upheld the country’s landmark “plain packaging” laws against an attack from Big Tobacco. Despite this, Australia’s landmark tobacco control law remains under threat as Big Tobacco company Philip Morris is challenging the law under the Hong Kong-Australia BIT. The U.S. company incorporated a subsidiary in Hong Kong in order to launch the attack.

The details of the cases are different - the Australian High Court ruled to uphold its law on the merits of the case, while the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling.  However, in both instances, deep-pocketed corporations are using trade and investment pacts to bypass and belittle the highest courts, even in countries with highly respected and independent judiciaries.

Under the investor-state dispute settlement system enshrined in U.S. Free Trade Agreements (FTAs) and BITs, private tribunals have awarded more than $2.5 billion in taxpayer compensation to corporations to compensate them for “lost profits.”  Despite such damage, these same rules are being expanded through the Trans-Pacific Partnership (TPP). A leaked investment chapter from the TPP reveals that the pact would require all TPP countries, including the United States, to allow foreign investors to launch investor-state attacks on their governments, to be decided by unaccountable foreign tribunals. Understandably, Australia has so far refused to be subjected to the investor-state dispute settlement in the TPP, but the U.S. is still pushing TPP negotiating countries to put investor "rights" before their own public interests.

The conclusion of the Chevron case is being closely monitored, and will have consequences beyond Lago Agrio. Reuters reports that “oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate.” If Chevron is successful in its attempts to avoid paying damages for egregious pollution, other companies will have affirmation that they have a chance to circumvent responsibility for environmental destruction by using the extreme investor-state system. 

July 26, 2012

Senators Defend Dolphin Protections Threatened by WTO Ruling

On Tuesday, Sen. Barbara Boxer (D-CA) led a bipartisan group of 14 Senators in sending a letter to Rebecca Blank (Acting Secretary of the U.S. Department of Commerce) and Ron Kirk (U.S. Trade Representative) expressing concern over last year's WTO tuna-dolphin ruling. The statement noted that while "cruel and lethal" tuna-fishing methods have killed over 6.5 million dolphins in the past six decades, the U.S. "Dolphin-Safe" tuna label has contributed to an amazing 98% decrease in such dolphin deaths since 1990.  As such, the Senators made clear that, despite the WTO's determination that "Dolphin-Safe" constitutes a trade violation, Congress intends to stand by current dolphin protection laws:

“We are deeply disappointed by the WTO’s final ruling, but we stand firmly committed to preserving the Dolphin-Safe label. Let us be clear--Congress has no intention of repealing or weakening the current law applying to this label.”

The Senators also sent a letter to Arturo Sarukhan Casamitjana, the Ambassador of Mexico to the U.S., requesting that Mexico comply with the U.S.’s request to hear the case under NAFTA. The letter expresses the Senators’ disappointment that “Mexico has continued to stall consideration of this issue under the North American Free Trade Agreement (NAFTA),” and urges Mexico to proceed with selection of NAFTA dispute resolution panelists so that the case can be resolved in a more timely manner.

These letters follow an impressive House letter, sent in May, urging the Obama administration to push back on the tuna-dolphin ruling.

For a more detailed analysis of the tuna-dolphin case, click here.  For the press release from Senator Boxer's office, click here.  

June 04, 2012

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

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

The lowlights?

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

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

 ++

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

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

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

June 02, 2012

CAFTA Ruling Continues Corporate Attack on Environmental Protection

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

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

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

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

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

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

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

Continue reading "CAFTA Ruling Continues Corporate Attack on Environmental Protection" »

May 31, 2012

Congress Stands up for Dolphins, Pushes Back on WTO

Rep. Ed Markey (D-Mass.), the ranking member on the House Natural Resources Committee, joined 42 colleagues in sending a strong letter to President Obama urging him to push back on the recent WTO ruling against dolphin-safe tuna labels.

In a press release, Markey said “The American people deserve to know whether or not the fish they eat was caught by killing Flipper... Dolphin-safe labeling of canned tuna has been successful in protecting the species and giving consumers informed choices.”

The letters calls the WTO decision "misguided," and says that "the U.S. intends to maintain the strong dolphin-safe standards, and not to water them down." The letter goes on:

The implication of the recent WTO ruling ... is that the U.S. should expend significant regulatory resources around the globe in an untargeted fashion, or alternatively, that imports from Mexico could utilize the dolphin-safe labels without having to meet the same requirements as tuna caught by U.S. or other nations' fleets. Neither result is acceptable, and 'complying' in either way simply invites further WTO litigation from other nations, not to mention serious disruption of the canned tuna market in the US and loss of consumer confidence in environmental laws and labels.

The letter included some notable signatories, including:

  • Ranking Members: Berman (Foreign Affairs), Frank (Financial Services), Markey (Natural Resources), and Miller (Ed and Labor)
  • Ways & Means Committee Members: Blumenauer, Doggett, Pascrell, Stark, and Van Hollen.
  • Oceans Subcommittee of Natural Resources Committee: Faleomavaega, Pallone, Bordallo and Pierluisi.
  • Voted for the Uruguay Round Implementation Act (implementing the WTO): Berman, Corrine Brown, Maloney, Markey, Moran, and Waters. Reps. Meeks and Towns - along with Moran, members of the so-called CAFTA 15 for their vote for that trade deal - also signed the letter.

See press release here, and letter here (PDF). See our further discussion of this ruling here.

May 16, 2012

Analysis: today's WTO ruling bad for dolphins, consumers... and even the WTO

We’ve waded our way through today's 165-page, 771-footnote WTO ruling against dolphin-safe labels. Here’s a quick guide to what it says and means.

What it means for dolphins

From the 1950s through the 1990s, an estimated seven million dolphins were killed in the Eastern Tropical Pacific from the practice of chasing, encircling and netting them to catch the tuna underneath. This was profitable because, unlike in other fisheries and regions, dolphin and tuna swim together.

Beginning in the late 1980s and early 1990s, something changed: consumers got organized. First, they instituted a ban on dolphin-unsafe tuna, which the WTO’s predecessor organization ruled against in 1991 and 1994 and which was subsequently repealed. Around the same time, dolphin-safe labels were put on tuna, in order to allow consumers to “vote with their dollars” for dolphin-safe methods. These measures have been successful in reducing dolphin deaths to near-negligible numbers.

Countries like Ecuador were the success stories, in adapting to the dolphin-safe methods, and therefore tapping into consumers’ demand for dolphin-safe tuna. The U.S. and nearly all other nations’ fleets also adapted. Mexico, on the other hand, is almost alone as a hold-out – using litigation rather than adaptation, and in the process branding its fish in the minds of consumers as dolphin-unsafe. Not a real forward looking strategy, to say the least. This WTO case, brought by Mexico in 2008, is just the latest indication of this – after pushing unsuccessfully for a decade to get the Clinton and Bush administration and the U.S. courts to water down the labels.

It is vital for the ongoing health of dolphin herds that the U.S. not bow to this pressure from the WTO.

What it means for consumers

If the U.S. gives in on this WTO threat, consumers will have lower quality or less information on which to base their tuna purchasing practices. For families with kids (including of the grown-up variety) who love animals like dolphins, this will be deeply troubling on its own.

But think of the precedent this sets. The WTO has now said that even voluntary labeling schemes are open to WTO attacks if not all countries (regardless of their production practices) equally benefit from them. This is going to be especially the case whenever there are complementary governmental efforts to ensure the accuracy of the claims on the label.

Labels like organic, cruelty-free, fair trade, Buy Local, Buy America, green, natural, worker-friendly, gluten free and everything else could be next.

What happens next

After today’s ruling, Mexico will begin pushing for elimination of the dolphin-safe labels, or to be allowed to use the label without meeting the U.S. standards.

Depending on how the compliance proceedings progress, the U.S. will have a matter of weeks or months to begin complying. After an extreme outer bound of about 15-18 months, Mexico may be able to begin instituting trade sanctions on U.S. goods or services. In the past, such sanctions have helped to create a domestic constituency in industry and Congress crying out for elimination of the “offending measure.”

It is vital that the U.S. communicate clearly to Mexico and other WTO members that the labeling standards will not be eliminated or watered down. The U.S. can talk to Mexico if need be about other options for compliance, and make the point that it is really long overdue for Mexico to bring its fishing practices into line with international norms.

What the ruling says

Maybe I’m losing my cynical edge, but I was shocked by today’s WTO Appellate Body (AB) ruling. There were a variety of ways that the AB could have worked itself out of the mess left by the September lower panel ruling, and instead, the AB chose to deepen the knot.

Continue reading "Analysis: today's WTO ruling bad for dolphins, consumers... and even the WTO" »

Public Citizen Condemns WTO Attack on U.S. Dolphin Protection Efforts

In Final Appeals Ruling, Global Commerce Agency Orders U.S. to Drop, Change Dolphin-Safe Tuna Labels

WASHINGTON, D.C. – The World Trade Organization’s (WTO) final ruling today against U.S. dolphin-safe labels on tuna cans deals a major blow to consumers’ ability to make free and informed decisions about how our food was caught and processed, Public Citizen said. This is the third time the WTO and its predecessor General Agreement on Tariffs and Trade have ruled against America’s dolphin protection policies.
 
“Today’s ruling makes very real the threats these overreaching pacts pose, which have little to do with traditional trade issues. The first round of this case in 1991 became known to environmental activists as ‘GATTzilla Kills Flipper’ and ignited U.S. public opposition to what would become the WTO,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Until that first ruling, and then a second one several years later, all we could do was point out worrisome negotiating text that we thought could undermine vital domestic environmental and other public interest policies – and then, suddenly, we had the proverbial smoking dolphin.”
 
Dolphin-safe tuna labels are strictly voluntary. If Mexican fleets chose to use dolphin-safe tuna-fishing methods, they would have access to the label, just like fish caught by U.S., Ecuadorean and other nations’ fleets. Mexico wanted access to the label without meeting the standards.
 
“This latest ruling makes truth-in-labeling the latest casualty of so-called ‘trade’ pacts, which are more about pushing deregulation than actual trade,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch. “Members of Congress and the public will be very concerned that even voluntary standards can be deemed trade barriers.”
 
The Obama administration is considering expanding some of these anti-consumer rules in the first trade deal it is negotiating – the nine-nation Trans-Pacific Partnership.
 
“This case underscores why countries must insist that WTO rules be altered and that no new agreements use the same corporate backdoor deregulation model,” said Wallach. “The Obama administration must stand with the thousands of Americans who have signed a Consumer Rights Pledge calling on the U.S. to not comply with these illegitimate trade pact rulings and to stop the Trans-Pacific Partnership trade negotiations that would greatly intensify this problem.”
 
This latest WTO ruling, along with two others in the past year against U.S. country-of-origin labels on meat and flavored cigarette bans, shows that a new approach to trade policy is needed – one that puts consumers, the environment and communities first, said Public Citizen.
 
Background
 
In September 2011, a WTO panel of three lawyers and diplomats from Chile, Singapore and Switzerland ruled that the U.S. dolphin-safe tuna labeling law violates WTO rules. The labels have been enormously successful in reducing dolphin deaths by tuna fishers – a major problem in the past, when tuna fleets set upon dolphins to catch tuna, since the two species associate with one another in the Eastern Pacific Ocean. The label allows consumers to “vote with their dollars” for dolphin-safe methods. Mexico successfully challenged the U.S. standard after decades of refusing to transition its fishing fleet to more dolphin-safe fishing methods.
 
Because Mexico prevailed on some counts but lost on others, both Mexico and the U.S. appealed the lower panel decision. 
 
Today’s Appellate Body ruling flipped the findings of the lower panel ruling. The lower panel found that the dolphin-safe labels were “more trade-restrictive than necessary to fulfil a legitimate objective.” While this finding was problematic, the lower panel at least acknowledged that the U.S. objectives of consumer information and dolphin protection were legitimate.

“The Appellate Body went in an even more anti-environment, anti-consumer direction by claiming that these labels – which regulate imported and domestic tuna alike, and for which many foreign nations’ tuna qualifies – were discriminatory against Mexico,” said Tucker.

This follows on a deeply troubling ruling from last month that found that a U.S. ban on sweet flavored cigarettes that applies to imported and domestic cigarettes also is somehow “discriminatory.”

“In essence, the WTO has found that voluntary is the new mandatory, and non-discriminatory is the new discriminatory,” added Tucker.

The ruling’s implications are dire, especially in the context of a decades-long battle to save dolphins. This struggle has been beset by countless trade-related obstacles: 1991 and 1994 rulings under the WTO’s predecessor organization led to the U.S. eliminating the more potent import ban of dolphin-unsafe tuna, and environmentalists fighting successfully in U.S. court to block the Clinton and Bush administrations from also watering down the voluntary labeling policy. These groups narrowly blocked this executive branch effort, which U.S. courts deemed “Orwellian” and “a compelling portrait of political meddling.”

April 20, 2012

Illegal log trade flourishes under U.S.-Peru trade deal

Our colleagues over at the Environmental Investigation Agency have just published a comprehensive study in the trade in illegal logging certificates in Peru in the years since the US-Peru FTA was signed. As they write:

By crossing public information on (a) the “supervision” inspections conducted by the Supervisory Body for Forest Resources and Wildlife (OSINFOR for its Spanish initials) on a series of timber concessions with (b) the documentation for CITES export permits for cedar and mahogany, EIA identified more than 100 shipments containing illegally logged CITES wood that were exported to the US between January 2008 and May 2010 – that is, more than 35% of all such shipments with CITES permits that left Peru for the US during this period.

Peru’s primary exporter, Maderera Bozovich, exported shipments under 152 CITES permits during this time, at least 45% of which included wood of illegal origin. It is likely that more supervisions in the field would discover that these percentages are actually higher.

The FTA contained a new Annex on Forest Sector Governance, which was put in place because Peru was (at the time of negotiations on the deal) one of the world's primary sources of cedar, mahogany and other endangered species. (Longtime Eyes on Trade readers will recall that the forestry annex was a major reason cited by key Democrats for their support of an otherwise fundamentally flawed trade deal, back when a minority of Democrats joined with a majority of Republicans to pass the deal back in 2007.) A provision of the annex reads that Peru is obligated to:

"Provide criminal and civil liability at adequate deterrent levels for actions that impede or undermine the sustainable management of Peru’s forest resources. Such actions shall include:

(i) Threats or violence against, or other intimidation of, government personnel engaged in enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products;
(ii) Knowingly creating, using, presenting or providing false information on any material document relating to enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products, including forest management plans, annual operating plans, applications for permits/concessions, and transportation documents;
(iii) Obstructing an investigation, verification, or audit conducted by government personnel engaged in enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products;
(iv) Knowingly harvesting or purchasing timber or timber products from areas or persons not authorized under Peruvian law; or knowingly transporting timber or timber products taken from areas or persons not authorized under Peruvian law; and
(v) Providing to a government official, or receiving as a government official, compensation, whether monetary or in kind, in exchange for particular action taken in the course of that official’s enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products."

While there is no statistical evidence that trade in endangered timber has increased, or that deforestation has increased, EIA is concerned (as I understand it) that the lack of accountability represented by the forged documents that do not line up to the actual origin of the trees sold and exported from 2008-10 could be an indication of deeper forestry abuses beneath the statistical surface or down the line. They're calling on the Obama administration to audit Peru's forestry practices, as a first step that could lead to actual retaliation under the FTA.

The FTA has been a fundamentally disruptive force in Peruvian life, disrupting presidential elections and now offering U.S. multinationals with tools to evade justice and environmental clean-up responsibilities. See this excellent report by the Sunlight Foundation's Keenan Steiner for more on this latter point, which makes mention of our March 2012 report on a recent so-called investor-state case under the U.S.-Peru FTA. The Obama administration is set to lock in and expand these rules under the Trans-Pacific Partnership trade deal, which both Peru and the US are in and which is also supported by presumptive GOP candidate Mitt Romney.

The significance of the EIA reports (you can check out EIA's 2010 study on the same topic) is that the best part of the FTA (the forestry sector annex) is delivering more information and attention to forestry, but has not yet led to fundamental change on the ground. To deliver that change, we'll have to see actual enforcement. Now, the ball's in Obama's (or Romney's) court. Will they deliver?

March 14, 2012

Global Trade Watch's Director Lori Wallach in The American Prospect

PACIFIC ILLUSIONS: NEW REPORT EXPOSES TRANS-PACIFIC PARTNERSHIP SHORTCOMINGS, AS OBAMA PRESSES AHEAD

 Washington, DC -- Today, President Obama will announce plans to escalate the administration's trade offensive against China. This follows the administration's pattern of taking a hard line on narrow issues, while at the same time working to finalize a much more consequential grand-bargain with the region: the Trans-Pacific Partnership (TPP). As Obama’s main trade and diplomatic thrust in the Pacific, the TPP is meant to revive the U.S. export economy and counter Chinese influence. In reality, it does neither. 

Pacific Illusions, a new special report by The American Prospect, examines why the TPP appears doomed to repeat the failures of previous free-trade agreements. 

Read Pacific Illusions online: http://bit.ly/AxMS2R

Pacific Illusions shows how the TPP fails on trade because it doesn’t address the most important issues: currency manipulation, trade with state-owned companies, investment subsidies to induce off-shoring, and the asymmetry between the mercantilist policies and practices of much of Asia and the free trade regime of the United States. 

Contributors and issues covered include:

-- Clyde Prestowitz, President of the Economic Strategy Institute, explains why the TPP will undercut the U.S. strategic position in "The Pacific Pivot."

 

-- Jeff Faux, founder of the Economic Policy Institute and now its distinguished fellow, analyzes how the deal will accelerate offshoring and drive down wages, in "The Myth of the Level Playing Field."

-- Lori Wallach, director of Public Citizen’s Global Trade Watch, argues that the provisions of the proposed deal and its secretive negotiations amount to a covert attack on regulation, in "A Stealth Attack on Democratic Governance."

-- Kevin P. Gallagher, associate professor of international relations at Boston University and senior researcher at the Global Development and Environment Institute, Tufts University describes how the damage won't be limited to the U.S., as the economies of smaller Asian countries will also take a hit, in "Not A Great Deal For Asia."

-- Merrill Goozner, senior correspondent for The Fiscal Times, takes a look at how U.S.-based solar and microchip industries will be harmed the agreement; Harold Meyerson, editor-at-large at The American Prospect, addresses the negative impact on auto and steel manufacturing. 

 

February 20, 2012

Non-Compliance in Investor-state proceedings

There were some interesting press hits over the weekend from Reuters' Alison Frankel, Adam Klasfeld, and AFP about the recent investor-state arbitral ruling against Ecuador.

(The award for Chevron was made by Horacio Grigera Naón (of American University, nominated by Chevron); Vaughan Lowe (of Oxford University, nominated by Ecuador); and V.V. Veeder ("one of the stars" of investment arbitration from the UK's Essex Court Chambers, appointed by the other two).)

Alison writes:

Lori Wallach of Public Citizen's Global Trade Watch told me that Ecuador should not comply with the panel's most recent order. (Wallach went to law school with Steven Donziger, the architect of the Ecuadorean plaintiffs' case, but is not a paid consultant for the plaintiffs.) Wallach agreed that countries regularly ignore orders from private arbitrators, whom she derided as "three private lawyers in a hotel room." She said that the directive from the Chevron panel, however, is "the most outlandish one I've seen." It's unprecedented for a panel to order an injunction that calls for an executive to interfere with a domestic court system, she said. "It would be as if one of these panels ordered Obama to act contrary to the Supreme Court," said Wallach, who has been tracking international arbitration since 1994. "Ecuador shouldn't follow it." (Public Citizen put out a press release Friday asserting that the Chevron panel's "obscene" award "could lead to the implosion of the entire investor-state system, which international companies are increasingly using to try to evade justice worldwide.")

Chevron counsel Randy Mastro of Gibson, Dunn & Crutcher said suggestions that the Republic should ignore the arbitrators' instruction are absurd. "Any country ignoring the ruling of an arbitration panel would be doing so at its peril," he said. Chevron's underlying claim in this arbitration, he pointed out, is for a judgment that under an old agreement with Chevron predecessor Texaco, the Republic of Ecuador is responsible for bearing all the costs associated with cleanup of the Lago Agrio region -- including Chevron's liability to the Ecuadorean plaintiffs. With that part of the arbitration pending, the Republic would be risking an adverse result if it flouted the panel's interim order.

"Typically, nations with treaty obligations honor those obligations or face the consequences," Mastro said.

This raises an interesting question, which a colleague asked me: “Are there any penalties written in the treaty if Ecuador disobeys the ruling?"

The US-Ecuador bilateral investment treaty says: “Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Party undertakes to carry out without delay the provisions of any such award and to provide in its territory for its enforcement.”

What if a country refuses to see itself as bound? What then?

Well, the BIT also says that all arbitrations “shall be held in a state that is a party to the New York Convention.” This creates a backdoor enforcement regime. When an arbitral tribunal orders a cash payment, a claimant can take the arbitral award to the national court of any signatory to the New York Convention (1958). This is about every country

Supposedly in all of these countries (but definitely in the developed countries), a national court will almost always agree to simply enforce the award, and they can order that the assets of the complainant or respondent (as needed) that may exist within national territory be impounded in order to make the payment. (Virtually every government has bank accounts or other assets in the US, UK and Switzerland, which is where most of these arbitral award enforcement actions occur.)

The situation is considerably murkier in the Chevron case, and there are not many (if any) precedents for non-cash related awards.

Chevron's counsel argues that Ecuador risks an adverse ruling in the "final award" if it flounts the interim measures award. (Interestingly, Veeder, Lowe and Grigera Naon have not even found that they have jurisdiction over the case, but assumed they did for the sake of making this injunction-like interim award.) I see a few problems with that argument. First, it's possible that there could never be a "final award." Second, if Ecuador already denounced the interim award, what would keep them from denouncing the final award?

Here's where we get to brass tacks, all extra-legal, so to speak:

  1. Chevron could argue that capital will dry up. This argument states that capital markets would refuse to lend to a country that didn’t “play by the rules.” Indeed, Argentina has had difficulty accessing international capital markets since its default and subsequent refusal to enter bond markets. However, this has not mattered since Argentina has strong internal capital markets, export markets and has been growing like gangbusters. My bet is that Ecuador (certainly under Correa) would not find this threat super credible either, although it could definitely make the government's life uncomfortable.
  2. Chevron could pressure U.S. to take foreign policy action. More recently, Obama has tried to pressure Argentina to comply with investor state rulings by voting against disbursements for Argentina in the Inter-American Development Bank. Congress may attach riders to appropriations for Argentina to pressure them to comply. This could hurt Ecuador, but the country also has been on the outs in trade preference legislation already.
  3. Chevron could press for war. In an earlier era of gunboat diplomacy, countries that didn’t “play by the rules” received a visit from the US or UK Armed Forces.

Although some of these sound absurd, they are options for "enforcing international law."

Now, Ecuador could attempt to launch a state-to-state dispute over the interpretation of the BIT. In fact, they’ve already done this in the earlier investor-state case brought by Chevron. (In that underlying case, Ecuador was ordered to pay Chevron around $100 million, essentially because Chevron argued that the Ecuadoran courts were moving too slow in hearing the case brought by indigenous people against the oil giant. Now, Chevron is essentially arguing that Ecuador is moving too fast, and they need international intervention.)

Since we don't know how that case will end up, it's hard to know how a second one could end up in Chevron v. Ecuador Part Deux, nor what if any consequence it could have on an adverse investor-state ruling. But it seems things will stay interesting in this case for a while to come.

UPDATE: Bottom line: Ecuador is stuck between a rock and a hard place. If the government complies with the investor-state ruling and therefore breaks its own Constitution, it risks revolution at home. If it ignores the investor-state ruling, it allows Chevron to continue its global campaign to isolate Ecuador in international capital markets and politics. Chevron would probably ultimately try to enforce a cash arbitral award in third country courts. I'm betting that the plaintiffs would, in this case, also try to enforce the Ecuadoran court ruling in third country courts. Essentially, compliance puts Ecuador on a constitutionally tainted collision course with its citizenry; non-compliance puts the investor-state system on a geopolitically tainted collision course with justice for the plaintiffs. Either situation is unprecedented.

February 17, 2012

Public Citizen statement on ruling in favor of Chevron

Speaking of the Chevron case, there was just a major development. Here's the ruling, and here's our statement:

Will Chevron Case Take Down Trade Pact ‘Investor-State’ Enforcement System?

Unprecedented Ruling Today by International Investor Tribunal Orders Ecuadorian Government to Violate Its Constitution, Interfere in Its Independent Court System to Help Chevron Evade Liability for Amazonian Contamination

WASHINGTON, D.C. – An unprecedented ruling, in which an investor-state international arbitral tribunal initiated by Chevron ordered the Ecuadorian government to interfere in the operations of Ecuador’s independent court system on behalf of the oil giant, provides a chilling glimpse of how corporations are trying to use international investor tribunals to evade justice, said Public Citizen.

After having lost on the merits in Ecuador and U.S. courts and after 18 years of trying to stall judgment, Chevron turned to an ad hoc “investor-state” tribunal of three private lawyers as the last chance to help the company avoid paying to clean up contamination in the Amazonian rainforest. Chevron is trying to get this private tribunal to suspend enforcement of or alter an $18 billion judgment against Chevron rendered by a sovereign country’s court system.

The tribunal issued a ruling yesterday even though it has not even determined that it has jurisdiction over the case. Past such international investor cases in which tribunals have ordered governments to pay cash damages to corporations have led to growing controversy.

“The Ecuadorian government should not violate its own constitution and interfere with its independent courts’ order for Chevron to clean up its horrific contamination in the Amazon, because some unelected ad hoc tribunal of three private sector lawyers called together by Chevron to meet in a rented room in Washington, D.C., pretends to have the authority to second-guess 18 years of U.S. and Ecuadorian court rulings,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

“Consider the broader implications of this star chamber ‘investor-state’ system: How can a panel of three unelected private sector lawyers order a sovereign government to violate its own constitution’s separation of powers and interfere in its court system, all to help Chevron (a company whose severe contamination of the Ecuadorian Amazon has been repeatedly proven), and how can that tribunal do this all before it has even decided that it has jurisdiction over this case,” Wallach said.

Meanwhile, the three private-sector lawyers serving as tribunalists on this kangaroo court will continue to rack up large hourly fees even as they order Ecuador’s government to help Chevron deny justice to the 30,000 Amazonian indigenous people who have won a historic $18 billion clean-up of deadly environmental contamination. Tribunalists in this system, who alternate between serving as “judges” and representing corporations in cases before panels of their colleagues, are paid on an hourly basis.

“The only silver lining of this obscene ruling is that having one of these shady investor-state tribunals presume to attack a country’s constitution, justice system and 30,000 people whose futures rely on Chevron cleaning up its mess could lead to the implosion of the entire investor-state system, which international companies are increasingly using to try to evade justice worldwide,” said Wallach.

These unaccountable investor-state tribunals have issued perverse rulings in the past on behalf of corporate claimants. Recent U.S. trade agreements empower foreign corporations to use this system to skirt our domestic courts and directly use our government before these corporate tribunals to obtain payment of unlimited taxpayer funds when they claim domestic environmental, land use, health and other laws undermine their “expected future profits.”  More than $350 million has been paid by government to corporations in attacks on toxics bans, environmental issues and zoning permits under the North American Free Trade Agreement (NAFTA.) Billions in additional claims are pending. Possible inclusion of the investor-state private enforcement system for corporations to sue governments is becoming one of the most controversial issues in the first “trade” deal the Obama administration is negotiating – a new Trans-Pacific Partnership trade deal.

###

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

Perils of a two-track justice system

During last week's events on the Chevron v. Ecuador investor-state case, someone asked an interesting question: say the Ecuadoran domestic ruling for the plaintiffs (who allege harm from environmental contamination by Texaco, now Chevron) stands. Say their legal team moves to attempt to enforce that ruling in other courts (say courts in Venezuela, where Chevron has some assets). How would a U.S. court treat the Ecuadoran or Venezuelan ruling?

This question actually perfectly illustrates the offensiveness of the two-track justice system that the investor-state system represents: the Ecuadoran plaintiffs would actually receive more favorable treatment of their enforcement actions if their original case had been an investor-state arbitration rather than a national court case. (Not that they would have standing in any case. I'm just sayin'.)

The U.S. (along with Ecuador and Venezuela) is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). An investor-state arbitral award anywhere in the world can be enforced in the U.S. with respect to assets of the respondent located in the U.S., which is considered a “secondary jurisdiction” under U.S. court interpretations of the Convention.

In 1985, the U.S. Supreme Court put its stamp of approval on the enforcement of arbitral awards. This appeared to be motivated in part by a desire to avoid losing some of this “business” to France and the UK. (For a fascinating history of this, see this book by Yves Dezalay and Bryant Garth.) As the court wrote in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.: “[C]oncerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce ... agreement[s]” to submit disputes to binding international arbitration.

However, most foreign court rulings (like the Ecuadoran ruling) will have difficulty being enforced in the U.S. The U.S. (along with almost every other country in the world) is not party to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, which would have set up an international framework for this.

As a consequence, legal scholar Brian Richard Paige writes, each U.S. state has different practices regarding recognition of foreign judgments. Moreover, the U.S. Supreme Court in Hilton v. Guyot, 159 U.S. 113 (1895), ruled that the U.S. would only enforce foreign rulings if the foreign government granted reciprocity, i.e. enforced U.S. rulings. Since most foreign governments hate U.S.-style class action cases, U.S. courts have been wary to recognize foreign judgments. As the Hilton case stated:

“When an action is brought in a court of this country, by a citizen of a foreign country against one of our own citizens, to recover a sum of money adjudged by a court of that country to be due from the defendant to the plaintiff, and the foreign judgment appears to have been rendered by a competent court, having jurisdiction of the cause and of the parties, and upon due allegations and proof, and opportunity to defend against them, and its proceedings are according to the course of a civilized jurisprudence, and are stated in a clear and formal record, the judgment is prima facie evidence, at least, of the truth of the matter adjudged; and it should be held conclusive upon the merits tried in the foreign court, unless some special ground is shown for impeaching the judgment, as by showing that it was affected by fraud or prejudice, or that by the principles of international law, and by the comity of our own country, it should not be given full credit and effect.”

However, as Paige writes, the Hilton Court refused to domesticate the French judgment on the ground that there was no showing that French courts would grant reciprocal treatment to judgments of the United States. As such, “the comity of our nation” did not require the Court “to give conclusive effect to the judgments of the courts of France.”

This stuff gets very complicated. Take a recent case in U.S. federal courts, KBC v. Pertamina. KBC was a Cayman company that had a contractual relationship with Pertamina, an Indonesia state owned enterprise. They agreed to arbitrate if they ran into problems, on Indonesian territory under UNCITRAL rules. On December 18, 2000, the arbitral panel issued a final decision awarding KBC more than $261 million in damages, lost profits, and costs of arbitration.

Pertamina asked for Swiss courts to overturn the award, which they did not do.

KBC, for its part, asked a Texas federal court to enforce the judgment. Pertamina appealed, but refused to post a bond. KBC then took it to New York court. Both courts upheld the arbitral award, on the basis of comity and the 1985 Mitsubishi precedent.

But then Pertamina launched a case in Cayman courts, arguing that the whole dispute was fraudulent. KBC then asked U.S. courts to enjoin the Cayman action, which they did, this time without referencing comity, but instead the need to uphold the New York Convention.

The case shows that an arbitral award in favor of Chevron is going to be given much more weight in U.S. courts than an Ecuadoran (or Venezuelan) court ruling in favor of the Ecuadoran plaintiffs.

I’m sure there’s a lot more legal complexity than what I’m capturing here in this quick review, but the comity doctrine seems to be among the most elastic on the books.

Moreover, the recent ruling in Donziger v. Chevron in the NY courts shows that U.S. judges were pretty unwilling to treat their Ecuadoran counterparts as equal. In a March 2011 ruling, Judge Lewis Kaplan wrote "that Ecuador has not provided impartial tribunals or procedures compatible with due process of law." While this was vacated in September, it definitely gives a flavor of what might go down.

February 09, 2012

Will Chevron case take down trade pact investor-state system?

Photo2015After having lost on the merits in Ecuador and U.S. courts, Chevron has turned to an ad hoc “investor-state” tribunal of three private lawyers to help the company avoid paying to clean up horrific contamination in the Amazonian rainforest.

Chevron is trying to get this private tribunal to suspend enforcement of or alter an $18 billion judgment against Chevron rendered by a sovereign country’s court system. The closed-door tribunal will meet in a rented room in Washington, DC Saturday and Sunday (February 11-12).

These unaccountable panels, from which no outside appeal is available, have issued perverse rulings in the past on behalf of corporate claimants. Recent U.S. trade agreements empower foreign corporations to use this system to skirt our domestic courts to directly use our government before these corporate tribunals to obtain payment of unlimited taxpayer funds when they claim domestic environmental, land use, health and other laws undermine their “expected future profits.” Really! This is becoming one of the most controversial issues in the first “trade” deal the Obama administration is negotiating - a new Trans-Pacific Free Trade Agreement (FTA).

Public Citizen, Amazon Watch and the Rainforest Action Network are standing up to Chevron's kangaroo court by organizing a rally and conducting a Teach-In at American University about Chevron's attempt to use the investor-state system to evade justice. They also will be conducting a press briefing. You are invited to attend all events.

January 20, 2012

Public Citizen Applauds Obama Administration’s Appeal of Trade Ruling Against U.S. Dolphin Protection Measures

Public Citizen commends the Obama administration for taking the necessary step of appealing today the harmful World Trade Organization (WTO) ruling against U.S. consumer and dolphin protection measures.

In September 2011, a WTO panel ruled that the U.S. dolphin-safe tuna labeling law violates WTO rules. The labels have been enormously successful in reducing dolphin deaths by tuna fishers – a major problem in the past, when tuna fleets set upon dolphins to catch tuna, since the two species associate with one another in the Eastern Pacific Ocean. The label allows consumers to “vote with their dollars” for dolphin-safe methods. Mexico successfully challenged the U.S. standard after decades of refusing to transition its fishing fleet to more dolphin-safe fishing methods.

The ruling’s implications are dire, especially in the context of a decades-long battle to save dolphins. This struggle has been beset by countless trade-related obstacles: 1991 and 1994 rulings under the WTO’s predecessor organization led to the U.S. eliminating the more potent import ban of dolphin-unsafe tuna, and environmentalists fighting successfully in U.S. court to block the Clinton and Bush administrations from also watering down the voluntary labeling policy. These groups narrowly blocked this executive branch effort, which U.S. courts deemed “Orwellian” and “a compelling portrait of political meddling.” The legitimacy of the WTO is likely to be further undermined if the WTO’s Appellate Body upholds the lower panel ruling. Consumer and environmental groups will see that the WTO allows anti-environmental forces a second (or third) bite at the apple, even when such forces fail in their U.S. legal and political efforts to undermine a domestic policy to which they object.

The Obama administration is considering expanding some of these anti-consumer and environmental rules in the first trade deal it is negotiating: the nine-nation Trans-Pacific Free Trade Agreement. The WTO ruling – and two others in 2011 against country-of-origin labels on meat and a ban on sweet cigarettes used to entice teens into smoking – show that a new approach to trade policy is needed, one that puts consumers, the environment and communities first.

January 19, 2012

NAFTA a way to restart Keystone Pipeline?

The Obama administration made a lot of us environmentalists happy with yesterday's decision to reject the Keystone XL pipeline.

Given that the Canadian government and corporations appear to be steaming mad about this, it's worth all of us reflecting on what their next move could be. A NAFTA case, for one, does not seem out of the question.

(If it seems far-fetched that Canadian entities might pursue these options, think of how much energy they've put into this pipeline. Compare this with how relatively little energy they've put into opposing U.S. financial regulations, yet in that case, they've already threatened to invoke NAFTA to derail the Dodd-Frank financial reform legislation.)

On what basis might a Canadian corporation, say, challenge the decision to reject the pipeline? The pending case against the Sultanate of Oman brought by U.S. investor Adel A Hamadi Al Tamimi under the US/Oman FTA is instructive. (That FTA is modeled on NAFTA.)

Mr. Al Tamimi is a UAE native, naturalized U.S. citizen and real estate developer in New England who invested in Oman through two UAE shell companies.  In 2006, his companies concluded ten-year lease agreements with the Oman Mining Company LLC (OMCO, a state-owned enterprise) related to a limestone quarrying/crushing operation.  OMCO committed to “use its best endeavors” to obtain “the necessary environmental and operating permits.”  In August 2007, OMCO told al Tamimi’s companies that the permits had been obtained, and that he was contractually required to commence operations,  which he did in September. Within weeks, officials from the Commerce and Environmental Ministries told al Tamimi that the final permits had not been obtained, and various stop-work orders were issued. 

As al Tamimi states, “OMCO now had to make a choice: it could fulfill its obligations under the Lease Agreements, which would mean disobeying or confronting the Environmental and Commerce Ministries, or it could use whatever leverage it had over the Companies and exert every effort to get them to suspend their operations until a solution could be found to the permitting issues. It chose the latter.”

By April 2008, al Tamimi had ceased operations.  Al Tamimi racked up various environmental fees, which he apparently did not pay.  In April 2009, OMCO told al Tamimi that he was in violation of environmental laws,  and in May 2009, he was arrested.  After being convicted of stealing and breaking environmental laws by a criminal court in November 2009, his conviction was overturned by an appeals court in June 2010.

Tying this back into the FTA rules... In 2011, al Tamimi launched an investor-state case under the Oman-U.S. FTA. He alleges that Oman expropriated his property rights by terminating the leases and bringing “the full force of the police power of the State to ensure cessation of all activities…”  He additionally claims that Oman undermined “his legitimate expectations” that he would be able to conduct quarrying operations and failed to provide “protection and security,” in violation of the U.S.-Oman FTA’s fair and equitable treatment (FET) standard.  He also says that other quarrying operations which he “believes to be owned and controlled by nationals of Oman” have been allowed to operate quarrying operations, in violation of the FTA’s national treatment obligations.

Similar arguments could be constructed in the Keystone case under NAFTA. TransCanada could point to a long string of overtures by the U.S. government that led it to develop "legitimate expectations" (as that is defined under trade law) that it would be able to build the pipeline, going from the private assurances in favor of the pipeline (recently revealed by FOIA documents to Friends of the Earth) and ending in the December 2011 payroll tax cut (which included Keystone-related provisions).

Those "expectations" could be then measured against what could be characterized under the FET standard as an arbitrary decision-making process, as when the Obama administration delayed the pipeline decision in November 2011 until after the presidential election.

TransCanada could point to some domestic pipeline operators that have not confronted similar hurdles as a basis for a National Treatment claim under NAFTA, while they could point to any lost expected future earnings as a basis for an "indirect expropriation" claim.

Stranger cases over much smaller sums of money have been launched before. There's been an outrageous string of cases against El Salvador over mining permitting issues. Over $350 million in compensation has already been paid out to corporations in a series of investor-state cases under NAFTA-style deals. This includes attacks on natural resource policies, environmental protection and health and safety measures, and more. In fact, of the over $12.5 billion in the 17 pending claims under NAFTA-style deals, all relate to environmental, public health and transportation policy – not traditional trade issues. For a full rundown of these NAFTA-style cases up until now, see this link.

If all of this seems like an outrage, it is. And what's worse is that the Obama administration is considering putting similar investor rules in a NAFTA-style deal with nine nations, called the Trans-Pacific FTA. Stay tuned for more on this!

December 02, 2011

Op-Ed: Trade rulings undermine consumer protection

Lori Wallach and Todd Tucker sound the alarm on the danger of three anti-consumer WTO rulings and the need to chart a path to a pro-consumer trade policy in an opinion piece in The Hill today:

Trade rulings undermine consumer protection

By Lori Wallach and Todd Tucker

“His name was Colin; here are his papers,” said the waitress presenting a bound prospectus to two diners who possess a limitless interest in the origin, diet and even friendship circle of the chicken they are about to order. The scene comes from Portlandia, the sketch comedy that skewers the bobo lifestyle.

Most of us aren’t quite so inquisitive about our food. But in an era of mass food-borne illness outbreaks, we do need retailers to provide basic information about our foods’ origins, and regulators to ensure the accuracy of these claims.

The country-of-origin labels we now rely on come from a 2008 law that ensures we know in which countries our meat was born, raised and slaughtered. The policy resulted from decades of consumer campaigning in response to slaughterhouses’ practices of routinely combining dozens of animals from diverse countries into the same hamburger patty, without having to even document the cattle’s origin.

Last month, the World Trade Organization (WTO) ruled that the law violated the global agency’s rules. A three-person tribunal in Geneva admitted that there was no strong evidence of quantifiable damage to Mexico and Canada, which challenged the law. Yet, if U.S. officials do not appeal or the appeal fails, the U.S. must weaken or eliminate the policy, or we face indefinite trade sanctions.

Continue reading "Op-Ed: Trade rulings undermine consumer protection" »

November 10, 2011

Sherrod Brown Tosses the Panama FTA

Well, not quite. But, man, that FTA text does look pretty heavy, and like it could put a hurtin' on some of the senators in the room that are against fair trade.

But here's a floor speech from fair trade champion Sen. Sherrod Brown (D-Ohio) on the night the Senate voted on the Panama, Korea and Colombia trade deals. It's about 30 minutes, and a very eloquent description of why these trade deals are no longer primarily about "trade," but about how we regulate our domestic economy. Brown's TRADE Act would go a long way to getting "trade" policy right.

November 01, 2011

NAFTA is the One Ring of our Democracy

Steven Pearlstein and Paul Krugman have nice pieces about the 25th anniversary of the Economic Policy Institute, arguably the leading labor market-focused center-left economics think-tank in D.C.

A prominent narrative is that EPI has grown to prominence for its analysis of the factors driving inequality, including trade policy. As Pearlstein writes:

While EPI and its labor allies have clearly lost the policy battle over free trade, economists have finally come around to its view that trade has had a significant role in widening the U.S. income gap. Even the Institute of International Economics acknowledges that some of the $1 trillion in benefits the U.S. economy gets every year from trade should be used to help the millions of workers who are hurt by trade.

Krugman chimes in on this point:

Since Pearlstein makes a point of mentioning some ancient disputes I had with EPI, I guess I should say something about where all that stands. The main thing, I think, is that trade policy — where I still have some differences with EPI — is much more peripheral an issue than it seemed to be in the early 1990s. I once had a conversation with Bob Kuttner in which we agreed that while we were arguing about NAFTA, Sauron was gathering his forces in Mordor.

If the point is that NAFTA and similar deals are not the only cause of rising inequality, I couldn't agree more. But that's actually the wrong question to be asking. The main raison d'etre of NAFTA-style deals is to set in place a body of rules that become the "new normal" in domestic regulation and international law. As Lori Wallach and I write in a piece published in the American Prospect yesterday:

Since NAFTA, trade agreements have grown to encompass thousands of pages of text, and only a minority of the provisions deal with tariffs—trade policy’s historic remit. Today’s so-called “trade” deals set constraints on how governments can regulate inside their own borders. For instance, the recent pacts ban "Buy America" policies that ensure tax dollars are used to purchase American-made goods and allow corporations to challenge environmental policies for cash compensation. They include such severe limits on financial regulation that the financial services industry celebrated the Korea deal in particular as “the best financial services chapter negotiated in a free trade agreement to date,” according to Citigroup.

These constraints on domestic regulation have a corrosive effect on democracy, and begin to shift the center of political gravity away from elected officials and towards unelected global bodies and corporations. Over time (and we see this every day on Capitol Hill), policy proposals are watered down in order to avoid conflicts with our trade agreements. 

Krugman and Kuttner are right that NAFTA is not to the labor market as Sauron is to Mordor. Rather, NAFTA and the WTO are to our democracy what the One Ring is to Mordor. Sauron, in this analogy, represents corporations.

As Tolkein fans know, the One Ring was designed by Sauron, and draws whoever bears it back to his Oneringdarkness. Its inscription reads: "One ring to rule them all, one ring to find them, One ring to bring them all and in the darkness bind them." The ring represents a set of dark rules that are difficult if not impossible to wield for good, and were designed with Sauron's narrow interests in mind (not all of Mordor's).

Our trade agreements provide the legal and ideological underpinning of neoliberalism. Our government (like Frodo) put these shackles on voluntarily, but now it finds its trajectory negatively influenced by the force. It is of course difficult to hypothesize whether neoliberalism would be destroyed if we got rid of NAFTA-style deals or the WTO. But the system's proponents would have to justify their corporate goals on some basis other than "it's the law."

October 11, 2011

Trade disaster: Congress votes tomorrow

A message from Lori Wallach, Director of Public Citizen's Global Trade Watch

You don't hear from me often. Over the past year, I have spend most of my time on Capitol Hill, meeting with members of Congress, educating them about our current flawed trade policy and how we can create a trade model that works.

I have been working to get a majority on Congress to say NO to the three devastating NAFTA-style trade deals signed by Pres. Bush that now Pres. Obama is trying to ram through Congress.

But today, I urgently need a favor from you. It will take about five minutes. Congress will vote on these job-killing, unsafe-import-flooding deals on Wednesday. I need you to pick up the phone and call 1-800-718-1008 right now to stop the three unfair trade deals with Korea, Colombia, and Panama.

Take 5 minutes to save jobs. Dial 1-800-718-1008 and tell your Representative to vote NO on all three flawed trade deals.

Here’s why:

  • The Korea trade deal is the largest offshoring deal of its kind since NAFTA. If approved, the deal will displace 159,000 American jobs in the first seven years. Even the official U.S. government study on the Korea pact says that it would increase our trade deficit, and it hits the "jobs of the future” sectors hardest – solar, high speed trains, computers. [Learn more]
  • We should have never even discussed a new trade deal with Colombia, the world capital for violence against workers. More unionists are assassinated every year than in the rest of the world combined. In 2010, 51 trade unionists were assassinated. Do you think we would consider a trade deal with a county where 51 CEOS were murdered? So far in 2011, another 22 have been killed, despite Colombia’s heralded new "Labor Action Plan.” [Learn more]
  • The Panama agreement has many of the same problems as the other two deals -- undercutting the reregulation of the big banks and speculators who destroyed our economy and empowering foreign investors to attack U.S. health, safety, labor and environmental laws before foreign tribunals. But, Panama is also one of the world’s largest tax havens. There, rich U.S. individuals and over 400,000 corporations take advantage of the offshore financial center, many dodging paying the taxes our communities desperately need. This FTA would undercut our current tools to fight tax dodging and money laundering. [Learn more]

Stop the trade deals that replicate the failed policies of the past. Call your Representative today.

Behind the scenes and throughout the country, our team has done everything we can do to try and get through to the leaders in Congress to stop these trade agreements. But it looks like many of our leaders in Washington—both Democrats and Republicans—are siding with corporate lobbyists instead of learning from the experience of working Americans.

YOU know the reality of these trade deals better than corporate lobbyists—and Congress needs to listen to you.

Please call 1-800-718-1008 right now.

Speak out with millions of Americans against the job-killing trade deals that only reward fat cats, off-shore our jobs and undermine our environmental and financial stability safeguards.

September 15, 2011

Flipper gets axed by the WTO

Today, U.S. efforts to reduce dolphin deaths by corporate tuna fishers through dolphin-safe labels on tuna were found to violate the WTO. This follows last week's ruling that U.S. efforts to reduce teen smoking violated the trade organization's rules. These smackdowns of major consumer regulations will be followed by a third in the near future, when the WTO is expected to rule against country of origin labeling for beef.

What this ruling means for consumers and dolphins

When the WTO rules against a country's policy, that country Dolphin-safe-logo2 has to change the law to comply, or risk trade sanctions.

The U.S. will have to get rid of the dolphin-safe labels, or water down the policy to Mexico's satisfaction. Mexico's long-standing position (reiterated in this case) is that it should get to receive a dolphin-safe label, even though tuna corporations there use methods to capture tuna that are dangerous for dolphins.

The U.S. currently defines "dolphin-safe" as tuna not caught using dangerous purse-seine nets anywhere in the world. For tuna caught in the Eastern Pacific, a unique region where dolphins and tuna swim together, additional steps are required to earn the label.

Shipping fleets of the U.S. and many developing countries (like Ecuador) operating in the Eastern Pacific have been able to meet these higher standards, thereby giving greater assurance to consumers that their tuna purchases are not harming dolphins.

In contrast, much of the Mexican fleet has chosen not to take such steps. Mexico has advocated use of a distinct standard that even the WTO acknowledges is weaker than the U.S. standard. The WTO ruling wrote of that distinct standard:

... taken alone, it fails to address unobserved adverse effects derived from repeated chasing, encircling and deploying purse seine nets on dolphins, such as separation of mothers and their dependent calves, killing of lactating females resulting in higher indirect mortality of dependent calves and reduced reproductive success due to acute stress caused by the use of helicopters and speedboats during the chase. 7.739 We also note that, to the extent that the AIDCP standard addresses setting on dolphins and not other fishing techniques that may also result in adverse effects on dolphins, it would also not provide an effective or appropriate means of fulfilling the US objectives in this respect.

Nonetheless, the WTO ruled against the U.S. standard. (We explore more of the details of the ruling below.)

Initial reports indicate that the Obama administration will appeal the ruling, although the track record of successful appeals is very limited and the WTO rules against challenged policies 90 percent of the time.

The broader worry is that this ruling leaves the door wide open to attacks on similar environmental and consumer policies - not only in the U.S., but all WTO member countries.

What this ruling means for trade policy

All three of these cases have something in common: none of them related to efforts by the U.S. to intentionally discriminate against foreign goods, nor to protect our own producers. Indeed, in the beef and dolphin cases, no discrimination could even be proved. (In the smoking case, a finding of "discrimination" was established in a biased analysis we detail here.) This alone would suggest that a trade organization has no business passing judgment on such policies.

But we are in a new era of trade policy, where even non-discriminatory, reasonable, even-handed, popular policies (some with virtually no impact on international trade) can be ruled against.

What's more, all three consumer policies could be considered very "free market"-oriented. Rather than the big old government telling Americans what they can and can't consume, the dolphin and beef policies simply require honesty in labeling, so that the consumer can decide on their own free will what to consume, and let the market works its magic.

We've long known that more interventionist government policies (like import bans) can run afoul of trade rules. Indeed, the two adverse rulings at the WTO's predecessor organization in the early 1990s against the U.S. ban on dolphin-unsafe tuna led to the eventual removal of that effective and popular policy tool. Now, with today's ruling, we learn that even regulation by more "free market" means is on the WTO chopping block.

This is going to make it harder for the Obama administration to sell similar anti-consumer trade initiatives like the trade deals with Korea, Panama and Colombia to free-marketeers and environmentalists across the political spectrum.

The long saga of protecting dolphins

After passage of various dolphin protection laws in the 1980s, the U.S. fishing industry abandoned the cruel and environmentally devastating practice of surrounding dolphins with mile-long purse seine nets to trap the schools of tuna fish swimming under the hunting mammals.  The practice had led to the death of millions of dolphins in the Eastern Tropical Pacific, where dolphins accompany schools of tuna.  The U.S. laws forbid the sale of tuna caught with purse seine nets.

In 1991, a General Agreement on Tariffs and Trade (GATT) tribunal ruled that this ban violated GATT rules forbidding discrimination. With the debate over NAFTA’s passage raging, Mexico decided not to impose trade sanctions when the United States maintained the laws. The U.S. prohibition was again successfully challenged under GATT by the European Union in 1994.

After NAFTA’s passage, the Clinton administration launched an intense effort to change the U.S. law to bring it into compliance with the initial ruling, while Mexico threatened a new WTO case to enforce the old ruling. After a lengthy battle with Congress, the Clinton administration managed to pass a new policy that removed the ban on U.S. sales of tuna caught with purse seine nets.

However, an attempt by the Clinton and Bush II administrations to weaken the related labeling law defining what could be labeled “dolphin safe” was reversed after a series of U.S. court cases.

Continue reading "Flipper gets axed by the WTO" »

WTO Rules Against Dolphin-Safe Tuna Labels

Round Three of the GATT-WTO Tuna-Dolphin Case: GATTzilla Kills Flipper Again

WASHINGTON, D.C. – The World Trade Organization (WTO) has ruled against the popular U.S. “dolphin-safe” tuna labeling in a case brought by Mexico, according to a panel report released today. The WTO has struggled to regain legitimacy following the highly visible 1999 Seattle protests that derailed plans to expand the organization’s remit – plans that have been sidelined ever since. Today’s ruling will intensify public opposition to the WTO, said Public Citizen. This is the third time the WTO and its predecessor General Agreement on Tariffs and Trade have ruled against America’s dolphin protection policies.

“It makes very real the threats these overreaching ‘trade’ pacts pose. The first round of this case in 1991 became known to environmental activists as ‘GATTzilla Kills Flipper’ and ignited U.S. public opposition to what would become the WTO,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Until that first ruling, and then a second one several years later, all we could do was point out worrisome negotiating text that we thought could undermine vital domestic environmental and other public interest policies – and then, suddenly, we had the proverbial smoking dolphin.

“In this case, a WTO tribunal is telling American consumers that having the product labels that we rely on to make sure that our shopping and dining choices do not result in dolphins being killed is a WTO violation. These are labels that apply to domestic and foreign tuna alike, that we pushed our Congress to pass,” said Wallach. “Fury about a foreign tribunal ruling against a popular U.S. consumer labeling law on a common food product, which has been explicitly and repeatedly approved by our courts, is among the few things likely to unite Americans across the political spectrum.”

Added Todd Tucker, research director for Public Citizen’s Global Trade Watch, “Dolphin-safe tuna labels are strictly voluntary; Mexico can sell tuna in the U.S. market with or without the label. ‘Voluntary’ is the new ‘mandatory,’ according to this WTO ruling. It tells consumers that even voluntary labels, and the subjective consumer preferences they may cultivate, are ripe for WTO attack.”

This ruling comes on the heels of two other WTO attacks on consumer protection and information policies. Last week, the WTO ruled against U.S. measures to reduce teenage smoking, while a recently leaked ruling concluded that country-of-origin labeling for beef is a WTO violation. All three of these consumer policies are very popular with Congress and the public. These adverse WTO rulings are likely to make it more difficult for the Obama administration to gain approval for three trade deals with Korea, Colombia and Panama that contain similar anti-consumer provisions, Wallach said.

June 27, 2011

Bulldozing Democracy One FTA at a Time

The vicious murder of university student and environmental activist Juan Francisco Duran Ayala earlier this month has stunned community members in the Cabanas region of El Salvador and beyond. Ayala is the fourth anti-mining activist from the Cabanas region to be killed in the past two years as growing community opposition to gold mining projects has been met with violence. Community groups, international NGOs and political leaders are calling for a thorough investigation into the material and intellectual authors of these murders.

This recent tragedy has brought renewed attention to the local conflicts erupting throughout Latin Mining America - from Peru to Mexico - regarding oil, mineral and gas extraction projects and their effects on the local environment.

And in recent years, many of these companies have gained new powerful foreign investor rights via so-called "free trade agreements" (FTAs) and bilateral investment treaties (BITs) that allow them to legally bulldoze through local community opposition and even to shape environmental policies in order to make sure their projects move forward. There are approximately 32 such investor cases launched by extractive industry
companies pending before the International Centre for Settlment of Disputes (ICSID) for hundreds of millions of dollars.

Over the weekend, the New York Times published a top story on this exploitation as it unfolds in El Salvador. As local and nation-wide opposition to precious-metals mining began to gain momentum in 2009, Canadian mining company  Pacific Rim Mining Corp. launched a case against El Salvador under the Central American Free Trade Agreement through a U.S. subsidiary.

The company is using CAFTA to challenge El Salvador's environmental policies and is seeking over $100 million in damages for allegedly not being given the green light to begin operating its "El Dorado" mine in the Cabanas region (the Salvadoran government argues the company did not complete the permitting process). The case is currently being heard before a World Bank tribunal in Washington, DC.

Although investment cases like these represent one of the most alarming institutional shifts in power between the public and corporations in decades (if not generations), the NYT, to our knowledge, has only written a total of three articles that explore the issue in any depth (including the one referenced above and here and here).

Hopefully in the weeks leading up to Congressional votes on new FTAs which will empower thousands of  companies with rights to seek compensation for state and federal policies in the U.S., Korea, Colombia and Panama, the NYT and other media outlets will delve more deeply into how these investor rights are already playing out in communities across the Americas.

June 24, 2011

Corporations push for WTO attack on green jobs

The Obama adminsitration is deliberating whether to get involved in a WTO attack on Canada's green jobs program, according to today's Inside U.S. Trade.

Last September, Japan announced that it would be challenging the Canadian province of Ontario's renewable energy program. As IUT reports:

The Ontario program, known as a "feed-in tariff" (FIT), enables producers of wind and solar energy to sell that electricity into the Ontario grid at a higher rate than what the government regulator offers for conventional energy. That higher rate can be up to six times greater than the rate for conventional energy, sources said.

However, producers can only qualify for the program if they use specific amount of Ontario goods Green-jobs-1 and services in establishing that renewable capacity. The domestic content requirement for projects that entered commercial operation in 2010 was 50 percent, and that increased to 60 percent in 2011, sources said.

The U.S. solar industry source contrasted this with "buy local" elements in the U.S. state and local green energy initiatives, which include a FIT program in Washington state and other renewable energy incentive programs in Massachusetts and Michigan.

Unlike the Ontario measure, these programs do not condition participation in the program on the use of domestic content. Instead, these U.S. programs allow both domestic and foreign producers to participate, but offer a small bonus for firms that use domestic content, the source said.

The source argued that this added bonus is not significant enough to affect the competitiveness of firms that do not source locally. The Ontario program, by contrast, completely excludes companies that do not produce a significant part of their product in the province, this source said.

While highlighting the differences between the U.S. and Canadian programs, this source made it clear that the U.S. solar industry opposes any type of local content requirement, and supports an initiative proposed among Asia-Pacific Economic Cooperation countries to phase out such requirements in the green energy sector.

This source acknowledged that U.S. state and local programs that provide a bonus for firms that source locally may also violate WTO rules, but suggested that these programs are not commercially significant.

In other words, Buy Local programs are fine, so long as they're not effective. Once green jobs policies start actually accomplish their goal of incentivizing local production (i.e. meaning something), that's when we launch a WTO attack.

As the sources cited by IUT note, multinational corporations aren't so much worried about the economic impact of a single green jobs program in a single Canadian province.

Instead, they appear to be worried that the program will set an example that will inspire other nations, states and localities to take comparable action. In other words, Ontario's FIT could have a positive demonstration effect by showing people that you can work together to democratically determine alternatives to the decimation of manufacturing jobs and our climate.

Under WTO rules, third countries can join a WTO attack initiated by another country. The good news (or what passes for good political news in the current climate) is that Obama's trade officials worry that, if they join the attack, it could boomerang and affect U.S. green jobs programs.

The bad news is that they are even having this discussion. Why take the side of solar panel companies that are apparently worried that they don't support enough local jobs to qualify? At a time when long distance shipping is contributing massively to global warming, it seems irresponsible not to look for ways to incentivize firms to produce, and purchase, locally.

May 20, 2011

U.S. dolphin-safe tuna labeling rule deemed a WTO violation

One of the environmental movement's greatest achievements has been the passage of legislation that protects dolphins from being slaughtered.

Now, U.S. dolphin protection rules have gotten slammed yet again by the WTO. GATT-zilla versus Flipper Take One Zillion: flipper goes down to defeat one more time.

We'll take you through some of the history of this battle. Worryingly, the WTO found that even purely voluntary labeling convention like the U.S. "do Dolphin-safe-logo2 lphin safe" labels could be deemed mandatory (and thus give rise to a WTO violation) if they impeded non-labeled tuna's "marketing opportunities in the United States." In other words, even private consumer preferences for dolphin-safe tuna can lead to a WTO violation. This could cast a real chill on voluntary labeling practices, which a lot of supporters of free trade are in favor of.

Moreover, the Obama administration did not appear to even use all possible defenses to fight against this attack.

As Inside U.S. Trade reported today,

In a confidential interim report circulated to the United States and Mexico earlier this month, a World Trade Organization panel found that U.S. labeling requirements that preclude many Mexican tuna exports from receiving a "dolphin safe" label in the United States violate international trade rules, according to informed sources.

The interim panel report found that the U.S. requirements violate Article 2.2 of the WTO's Agreement on Technical Barriers to Trade (TBT). That article forbids WTO members from implementing "technical regulations" that are "more trade-restrictive than necessary to fulfill a legitimate objective."

The case is likely to go to the Appellate Body of the WTO. But, assuming the initial WTO panel was correctly applying the WTO's anti-environmental, pro-corporate trade rules, the U.S. will have to (again) water down its dolphin protection policies or face trade sanctions.

This case has a long and sordid history, as we documented all the way back in 2000:

Continue reading "U.S. dolphin-safe tuna labeling rule deemed a WTO violation" »

April 04, 2011

The Korea FTA: Putting Corporations Before the Public Interest

We’re continuing our series of facts in response to the Korean Embassy’s misleading claims on the Korea Free Trade Agreement (FTA). Our full response can be viewed here. This time, the focus is on the Korea FTA’s investor-state dispute resolution mechanism that threatens public interest laws.

Lori Wallach’s Huffington Post piece: The Korea FTA’s investor-state dispute resolution mechanism “empowers foreign investors to skirt domestic courts and seek cash compensation for regulatory costs before foreign tribunals…”

Korean Embassy’s claim: “The investor-state dispute resolution mechanism in the KORUS FTA is a common feature of free trade agreements and bilateral investment treaties, of which there are more than 3,000 worldwide. NAFTA has an identical investor-state dispute resolution chapter. Since it took effect in 1994, Mexican and Canadian companies have filed 18 requests for arbitration against the U.S. government. They have won none of them.” Elsewhere, the Embassy adds that, “Some opponents of the FTA have alleged that this section will provide Korean companies with rights greater than those afforded to U.S. companies. Not only is that not true, it is directly rebutted in the text of the agreement which says, ‘foreign investors are not hereby accorded greater substantive rights with respect to investment protections than domestic investors under domestic law where, as in the United States, protections of investor rights under domestic law equal or exceed those set forth in this Agreement.’”[i]

Facts: Opposition to the investor-state system is at an all time high, in part because of such callous attitudes from governments. In July of last year, 110 members of Congress sent a letter to President Obama opposing the investor-state mechanism in the Korea FTA, among other provisions.[ii] A bipartisan group of 146 legislators (including the majority of House Democrats) cosponsored the TRADE Act, which called for elimination of the investor-state system. And in September 2010, over 550 faith, family farm, environmental, labor, and consumer protection organizations signed a letter to President Obama urging that he remove the investor-state mechanism from the Korea FTA.[iii]

The Embassy would like to portray the investor-state dispute settlement mechanism as mundane and uncontroversial. Nothing could be farther from the truth. In October 2010, Korean legislators and members of the U.S. Congress sent a joint letter to President Obama and President Lee that called on them to change the text of the FTA to eliminate the threat of investor-state lawsuits.[iv] The recent joint statement of Korean lawmakers, labor unions, farmers and civil society groups highlighted in Lori Wallach’s Huffington Post piece reiterates the deep concern of Koreans that the investor-state mechanism would allow multinational corporations “to bring our government to the foreign arbitration tribunals to demand compensation over public policy standards, even those that apply to domestic and foreign corporations alike.”[v]

Language cited by Embassy is non-binding. To counter the fact that the FTA’s clear language in Chapter 10 does provide Korea firms operating here better rights than domestic firms, the Embassy quotes a provision of the FTA (e.g. “foreign investors are not hereby…) that is in the preamble of the agreement and thus non-binding. The non-binding nature of the preamble was noted most recently by the U.S. State Department in the Grand Rivers et. al. vs. United States investor-state arbitration under NAFTA, which stated: “the key to interpreting the provisions of the NAFTA must be the text itself, as informed by the treaty’s context, object, and purpose, only to the extent those additional sources are relevant to, and consonant with, the substantive provision at issue. This approach is grounded in the well-accepted principle that general objectives can shed light on treaty provisions, but cannot impose independent obligations on treaty signatories.”[vi]

Continue reading "The Korea FTA: Putting Corporations Before the Public Interest" »

February 23, 2011

Shell, shell, shell companies

Last year, we reported on how a Canadian-Cayman mining company, Pac Rim Cayman LLC, was using the U.S.-Central America Free Trade Agreement to challenge El Salvadoran mining policy. There are seven parties to CAFTA, and none of them is Canada or the Cayman islands.

In the months before launching a CAFTA case, Pac Rim Cayman LLC changed its incorporation from Cayman Islands to Nevada. El Salvador reasonably got suspicious about this convenient change of nationality, and is asking a CAFTA court convened at the World Bank (ICSID) to dismiss the case because of a lack of jurisdiction.

The case represents the most detailed analysis of corporations' "nationality planning" by an investor-state panel under a U.S. trade or investment agreement. Some of the key highlights from El Salvador's most recent objection to ICSID jurisdiction:

"77. In fact, Claimant has been forced to admit that CAFTA was at least a consideration in the decision to change the nationality of Pac Rim Cayman from the Cayman Islands to the United States. Mr. Shrake states, "[a]s part of this overall assessment of the Companies' organizational structure, I also considered the Companies' potential avenues of recourse if a dispute with El Salvador were ever to arise in the future."...

86. On the record there can be no doubt that the main reason to move Pac Rim Cayman to the United States in December 2007 was to gain treaty protection for the existing dispute related to the El Dorado mine. In its Counter-Memorial, Claimant does not dispute the facts: Pac Rim Cayman was not "repatriated" as Claimant asserted in its August 17, 2010 letter to the Tribunal; it has no office or assets in the United States; the capital invested in El Salvador was transferred from Canada; and there were no other changes to Pac Rim Cayman as a Nevada company.

87. Nevertheless, Claimant now alleges that the change of nationality was to save money. But, despite Claimant's suggestion that 2007 differed from other years because Pacific Rim Mining Corp. recorded a big loss, the truth is that Pacific Rim Mining Corp. has a history of losses, including $4.6 million for fiscal year 2005, $6.9 million for fiscal year 2004, and $2.8 million for fiscal year 2003. Moreover, although Claimant claims that the move saved it "the costs of maintaining Pac Rim Cayman in the Cayman Islands," Claimant presents no evidence that the costs of maintaining a limited liability company in Nevada are significantly cheaper than being incorporated in the Cayman Islands.

88. In fact, given the actual costs involved, the assertion that cost savings was the primary reason and access to CAFTA just a convenient afterthought, is hardly credible. According to the Cayman Islands Chamber of Commerce, a non-resident company currently pays between U.S. $488 and $689 to register and as an annual fee in the Cayman Islands, while an exempt company pays between $573 and up to $2400 for companies with maximum shareholder capital. Cost could not have been a major concern. Moreover, Claimant spent at least $575 to register, submit an initial list of managers, and acquire a business license in Nevada...

106. As discussed above and in El Salvador's Memorial, there is no evidence of Pac Rim Cayman having any business activities whatsoever. It is a shell moved around for the purposes of Pacific Rim Mining Corp. This is hardly disputed. All that Claimant argues is: "Pac Rim Cayman is . . . engaged in the substantial business activities of holding and managing investments in El Salvador from its headquarters in Nevada." Even this statement is misleading. The evidence produced by El Salvador clearly demonstrates that Pac Rim Cayman—a company with no employees, no office space leased under its name, no telephone, no office equipment, and no bank account—has no capacity to manage anything. Moreover, while there is no doubt that it is a holding company, Pac Rim Cayman does not even hold "investments" in El Salvador. It holds shares in Salvadoran companies used as investment vehicles by the common parent company Pacific Rim Mining Corp. Pac Rim Cayman's only "activity" is the purely passive holding of shares in two other companies under its name.

107. As El Salvador stated in its Memorial, holding shares in its name cannot be substantial business activity: "every shell company set up by a non-Party national to try to gain CAFTA jurisdiction will have 'holding' activities related to the investments of the non-Party parent company." The denial of benefits provision would be rendered meaningless if merely holding shares or investments qualified as "substantial business activities in the territory of any Party."

108. Moreover, the fact that an officer of the Canadian parent company was located in the United States when he made decisions about what other subsidiaries the Cayman Islands subsidiary, Pac Rim Cayman, would hold, does not amount to business activities for a U.S. enterprise. Like Claimant's other arguments, this would defeat the purpose of a denial of benefits clause. The alleged substantial activities must be connected to the enterprise when it is a national of the Party.

109. Of course, some holding companies may be able to establish that they are legitimate entities functioning within the territory of a Party. Pac Rim Cayman is not such a holding company. This is clear from Claimant's misleading attempt to align itself with the AMTO claimant: "[m]uch like Pac Rim Cayman, AMTO was a holding company with two fulltime employees." In fact, unlike AMTO, Pac Rim Cayman has no employees. In response to El Salvador's request for information ordered by the Tribunal, Pac Rim Cayman was not able to produce any evidence that it pays the salaries of any employees, or even a portion of the salaries of its two managers, who are also officers of the Canadian parent company and paid by the Canadian company and other subsidiaries. In addition, unlike Pac Rim Cayman, AMTO paid income tax and social insurance payments for its two employees, had a bank account, and leased an office for several years during which the investment was made and the dispute arose. The only thing that Pac Rim Cayman and AMTO have in common is that they are holding companies. Pac Rim Cayman has none of the characteristics that led the AMTO tribunal to conclude that AMTO had substantial business activities.

110. Claimant is a shell company, with no employees, no office, and no revenue. Pac Rim Cayman's subsidiaries, PRES and DOREX, are investment vehicles in El Salvador that do not contribute to Pac Rim Cayman having any activities in the United States. The activities of Pacific Rim Exploration, minimal as they are, should not be counted as activities of Pac Rim Cayman, because Pacific Rim Exploration was only moved to be held through Pac Rim Cayman as part of the abusive scheme to gain jurisdiction, at the same time Pac Rim Cayman's nationality was changed from the Cayman Islands to the United States. The only business activity Pac Rim Cayman can claim—"holding" the shares in the investment vehicles in El Salvador—is clearly insufficient.

El Salvador's legal defense is doing its best to ward off the attack on its environmental policies, but the underlying rules on how "investor" is defined by CAFTA and other NAFTA-style agreements are pretty lame. For instance, Pac Rim Cayman LLC, in its counter memorial on jurisdiction, wrote:

"Far from being “passive” vehicles for questionable purposes, holding companies have been described as “the fundamental building block of the global economy,” a “common and legal device for corporate organization [that] face the same legal obligations of corporations generally.” A holding company is a “company formed to control other companies, usu[ally] confining its role to owning stock and supervising management.”...

there is nothing wrong with an investor’s decision to structure its business activities in order to gain CAFTA’s benefits after investing in the territory of a CAFTA Party and before a dispute with that Party has arisen. Respondent itself admits as much, acknowledging that “prospective nationality planning has generally been accepted by arbitral tribunals, even if the nationality of the foreign investor has been selected to gain tax advantages or treaty protection in the event of future disputes.” One such instance
was in the Aguas del Tunari case, where the tribunal noted that it was “not uncommon in practice” to “locate one’s operations in a jurisdiction perceived to provide a beneficial legal and regulatory environment in terms, for examples, of taxation or the substantive law of the jurisdiction, including the availability of a BIT.”...

Penalizing an investor for taking prudent steps to protect itself in the event that the host State later purports to deny CAFTA’s benefits to the investor would only serve to discourage investors from investing in the territories of the Parties, and would, moreover, undermine CAFTA’s purpose of providing for the settlement of investment disputes."

El Salvador had to agree, saying,"As Claimant points out, structuring an investment ahead of time in order to gain treaty protection may be acceptable, but changing nationality after a dispute has arisen in order to qualify for treaty protection is Abuse of Process."

We need a different set of rules to ward off against investor-state challenges from shell or near-shell companies. After all, NAFTA-style deals prohibit countries from requiring foreign investors to give back to the community or protect environment (so-called "performance requirements".) But the deals don't set up any economically meaningful threshold for an investor actually creating a significant number of jobs before they can use NAFTA- or CAFTA-style rights. This is putting investors ahead of the public and national interest, even when they're not making investments.

(Kind of an analogue to the U.S. tax policy debate, where both parties compete to give corporations back money so that they can invest it "without any government meddling", that they go on to hoard rather than invest.)

It is ridiculous that El Salvador is forced to argue about precedents that would have allowed as few as two employees to be considered substantial business activities. While we debate whether the stimulus package created or saved closer to a million or closer to two million jobs, it seems a little ridiculous to be advancing investment provisions of NAFTA-style trade policies that split hairs about whether as few as two employees entitles a company to massive investor rights. And we wonder why the U.S. government has a hard time creating jobs: we've forgotten how to protect the policy space to actually create jobs, either at home or abroad.

But, there's a fair trade way of re-writing these "denial of benefits" provisions of trade deals. We suggest some ways this could be done here.

February 22, 2011

Grand River Case Shows U.S. Open to Financial Liability in NAFTA Attacks on Public Health Laws

The State Department published the NAFTA award in Grand River Enterprises Six Nations, Ltd. et. al. v. United States of America last week, a month after it was dispatched privately to the parties. The case was brought against the United States by a Canadian tobacco corporation that sold tobacco on reservations in the U.S. and three Canadian members of the Haudenosaunee indigenous group who owned or did business with the corporation. The claimants argued that implementation of the deal that U.S. states made with tobacco companies in the 1990s and later to address underage smoking and public health concerns about tobacco violated their NAFTA rights. The award, and other associated documents, is available here: http://www.state.gov/s/l/c11935.htm

While the United States thankfully prevailed in the case, the award raises serious concerns about NAFTA-style investment rules. Among the top concerns from my initial read of the award:

Even when governments win NAFTA disputes on the merits, taxpayers are on the hook for the multi-million dollar costs of arbitration. In this case, U.S. taxpayers had to cover nearly $3 million in legal and arbitration fees, despite the U.S. emerging victorious. (paragraph 241) The investor-state system is becoming so expensive that hedge funds are creating special financing vehicles to loan money to corporations and individuals pursuing attacks on national policies. While private companies can profit off of this system, taxpayers are left with nothing but liability for these often meritless claims.

NAFTA attacks allowed against public health measures. The U.S. states’ settlement with the tobacco companies was a complex response to a complex political and regulatory problem. In 1998, 46 U.S. states entered into a settlement agreement with Philip Morris Inc., R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corp., and Lorillard Tobacco Company, (“participating manufacturers” or PMs) to resolve claims that the states had filed seeking to recoup medical expenses incurred for treating smoking-related illnesses of indigent smokers and to pay for smoking reduction programs.  As part of the settlement agreement, the PMs agreed to pay the states over $246 billion over the next 25 years,  and to restrict marketing directed at children. 

Continue reading "Grand River Case Shows U.S. Open to Financial Liability in NAFTA Attacks on Public Health Laws" »

February 01, 2011

Environmental health at stake in first corporate attack under Peru NAFTA deal

It's February 1, which makes it two years since the Bush administration rushed to implement the NAFTA-style deal with Peru right before it left office, and over the objections of the congressional Democrats that had partnered with the administration to get it through Congress.

On the second anniversary of the Peru FTA implementation, we see a lead company attacking Peru's policies related to environmental health. Details about the Renco v. Peru case are scarce, but we know that the company involves a U.S. multinational that got upset after getting smacked with a U.S. lawsuit filed on behalf of 137 Peruvian children who have suffered from lead poisoning. Renco is now claiming $800 million from irritants related to its commitment to clean up the environmental mess on its site.

You can find information about the U.S. lawsuit here, and about the FTA investor-state case here, and here also here. And more after the jump...

Continue reading "Environmental health at stake in first corporate attack under Peru NAFTA deal" »

January 18, 2011

How much will this party cost?

Earlier this month, the Washington Post reported a dramatic uptick in the number of corporate investor4100628349_2ebd7ddc84_t challenges being heard by the International Centre for Settlement of Investment Disputes (ICSID) - a World Bank group charged with arbitrating investment disputes. So much so, that a new legal niche is growing to meet the demand:

Geography has been kind to the District law firms equipped to handle international dispute resolution. As the host city of the ICSID, which has seen its caseload grow from between one and four cases a year from 1972 to 1996 to an apogee of 37 cases in 2007 and 27 in the fiscal year of 2010, the attorneys here are in close proximity to the action. The nation's capital is also seen as a key connection point between Latin America, where nearly a third of ICSID cases originate, and the rest of the world. The Argentine economic crisis of the late 1990s and early 2000s prompted at least 40 ICSID cases on its own, prompting the country to open a special District office to oversee its interests here.

There must a better way to create jobs in Washington, DC - perhaps a way that doesn't also facilitate the  trampling of local public health and environmental protecions or drain taxpayer resources in the United States and in trading partner countries? For more details about the kinds of cases multinational investors bring before ICSID, see Public Citizen's NAFTA Chapter 11 database. Also read up on El Salvador's struggle to preserve its environment in the face of two recent CAFTA cases challenging Salvadoran mining policy decisions. 

In the coming months the U.S. Congress will decide whether to expand the ICSID party! If implemented, the Korea FTA would empower hundreds of U.S. and Korean multinational investors to bring suits against the U.S. and Korean governments at ICSID should they want to argue that their slew of new investor rights has been violated.

January 11, 2011

Pentagon Can Buy Foreign Solar Panels

The New York Times recently reported about an important step forward with the Pentagon's plan to buy solar panels:

The military authorization law signed by President Obama on Friday contains a little-noticed “Buy American” provision for the Defense Department purchases of solar panels — a provision that is likely to dismay Chinese officials as President Hu Jintao prepares to visit the United States next week...

The new Buy American provision, created mainly by House and Senate conferees during a flurry of activity at the end of the lame-duck session of Congress, prevents the Defense Department from buying Chinese-made solar panels.

The American military is a rapidly growing consumer of renewable energy products, because it is extremely expensive and frequently dangerous to ship large quantities of fuel into remote areas of Iraq and Afghanistan.

The bill is the Ike Skelton National Defense Authorization Act for Fiscal Year 2011. Here's the relevant provision:

SEC. 846. PROCUREMENT OF PHOTOVOLTAIC DEVICES.

      (a) Contract Requirement- The Secretary of Defense shall ensure that each contract described in subsection (b) awarded by the Department of Defense includes a provision requiring the photovoltaic devices provided under the contract to comply with the Buy American Act (41 U.S.C. 10a et seq.), subject to the exceptions to that Act provided in the Trade Agreements Act of 1979 (19 U.S.C. 2501 et seq.) or otherwise provided by law.

      (b) Contracts Described- The contracts described in this subsection include energy savings performance contracts, utility service contracts, land leases, and private housing contracts, to the extent that such contracts result in ownership of photovoltaic devices by the Department of Defense. For the purposes of this section, the Department of Defense is deemed to own a photovoltaic device if the device is--

            (1) installed on Department of Defense property or in a facility owned by the Department of Defense; and

            (2) reserved for the exclusive use of the Department of Defense for the full economic life of the device.

      (c) Definition of Photovoltaic Devices- In this section, the term `photovoltaic devices' means devices that convert light directly into electricity through a solid-state, semiconductor process.

But dig a bit deeper into the NYT story to understand what the phrase "subject to the exceptions..." means in plain English:

Two prominent trade lawyers said in e-mails over the weekend that the law’s language meant that in practice, the Defense Department must buy solar panels from any country that signs the W.T.O.’s side agreement on government procurement. Earlier American trade laws require compliance with that agreement.

Virtually all industrialized countries have signed the side agreement, which requires free trade in government purchases. China vowed to sign it as soon as possible when it joined the W.T.O. in November 2001, but still has not done so.

The two trade lawyers said that the United States was within its rights to discriminate against Chinese solar panels in military procurement.

It's true. We have to exempt the 39 members of the WTO's Government Procurement Agreement from Buy America rules, which includes Korea and other major competitors. These exemptions also apply to an additional 13 countries with whom the United States has so-called "free trade agreements." They would apply to Panama and Colombia if President Obama adopts those Bush-negotiated pacts as his own.

All that's keeping the U.S. Buy America program from giving advantages to Chinese solar panels is a piece of paper (signing the WTO's procurement agreement). China could sign that piece of paper tomorrow, and get those benefits.

Why did U.S. negotiators ever agree to give away the store like that? So much for our bright future of domestic solar panel production.

(Also, the NYT story misrepresents the Buy America legislation. It doesn't prohibit purchases of Chinese solar panels. It just gives a price preference to U.S.-made panels. If Chinese solar panels are as little as six percent less expensive, U.S. authorities can waive Buy American requirements. Note that the Department of Energy has used another exemption - the so-called public interest exemption - to buy foreign made solar cells.)

December 06, 2010

Industrial Policy IS Sexy - CRT

The following is recent dispatch from the Climate Reality Tour - a movement building bike tour. My bike partner and I are biking from West Virginia to the U.N. Climate Talks in Cancún to connect the dots between Globalization policies and global climate change. DSC01737

+++ For most folks, there might be nothing less sexy than industrial policy. An abstract government process for deciding how to intervene in the globalized marketplace to support what major industries - often quite polluting ones. It lacks the high-speed flare of bike culture (in which we are awash), the colorful bouquet of community gardening, the human drama of environmental justice struggle.

But green industrial policy might just be what saves the planet. It’s a tragic that it’s sultry allure is lost on us.

We were impressed in our interview with Bill Londrigan, the President of the Kentucky AFL-CIO, how deeply he understood the need for holistic green industrial policy – one that moves rapidly to phase out dirty industry and replace it with green jobs. “Hopefully we can make some rational decisions about where we need to go… to make sure we can evolve to where [energy and industry] aren’t harmful to the environment” Londrigan says. “And the government could play a great role.”

But we are talking more than your typical one-time weatherization jobs and beyond just the renewable energy sector. Green industrial policy can tie the other threads together, and create jobs and healthier communities in the process. As has been discussed, if we shifted our food, transit, and energy policy we could address the injustice and unsustainability in those systems. We can imagine regional bike manufacturing with green energy, and labor-intensive local food systems underwritten by our government. This would be welcome industrial policy to shift from unsustainable centralized corporate status quo.

Continue reading "Industrial Policy IS Sexy - CRT" »

October 29, 2010

Obama's climate solution: undermine green standards abroad?

As we document in a new memo, President Bush's Korea trade deal, and NAFTA-style agreements in general, are the most politically toxic policy since giving Viagra to convicted child molesters.(As Ezra Klein writes, the latter is unfortunately a campaign talking point for some candidates.)

As our day-after election report will show, candidates of both parties are campaigning against unfair trade and offshoring. This includes the few Democrats that could somehow beat the odds and have the party retain the House, or the likely GOP margin makers. And 110 House members, along with the AFL-CIO and Sierra Club, have called for fundamental changes to the Korea deal's harmful deregulatory provisions on financial services and investment.

Somehow, I don't think this is what they had in mind. Mark Drajem at Bloomberg reports that...

The U.S. is asking South Korea to accept American automobile safety and emissions standards in an effort to advance a free-trade agreement, according to three people briefed on the talks.

Under the proposal, if American-made automobiles meet U.S. regulatory standards, South Korea would have to permit the vehicles to be sold in that nation...

Obama campaigned and won on calling for tough auto emissions standards here at home. And the EPA has made some important progress on this front under Obama. However, the U.S. is projected to have lower standards than Korea over the coming years, as Korea will have a 40 miles per gallon proposed standard by 2015, while the U.S. will still only have a 37.8 mpg proposed standard.

Unfortunately, this latest move from the administration is an echo of actions Treasury Secretary Tim Geithner took last year on Europe's (better) hedge fund regulations.

So, it's 2010. The glass is half-to-fully empty on environmental and financial regs here at home, thanks to watering down under industry and Senate pressure. The administration's solution should be to fill up the dang glasses, not try to break other countries' fuller ones through trade deals. We can only hope that this is a testing-the-waters kind of proposal, and that the Obama administration will commit to more robust reform prior to the G-20 in Seoul.

October 27, 2010

Follow the Climate Reality Tour!

DSC01484 We’re pleased to unveil an exciting new project: the Climate Reality Tour.

You may have caught an earlier post, but in case you didn't, let's fill you in The Climate Reality Tour is a movement-building road trip to promote global economic policies that are fair for workers and shift away from the climate- and job-destroying status quo. The destination? The United Nations Climate Negotiations in Cancun in late November. And to bring home the sustainability point, we decided to go by bike. Yep, by bike!

With the world in the grips of overlapping global crises – food, economic/financial and climate – the stakes are high indeed. To save the planet requires confronting these crises simultaneously, and that means overcoming the false jobs vs. environment trade-off. In truth, corporations benefit from exploiting both while human beings and the earth suffer.

But this requires political will and resolve far beyond what we’ve seen from either political party, and even many leading civil society organizations. At Public Citizen, we’ve long believed our unsustainable global economic order, as etched in the tomes of the WTO and NAFTA-type trade deals, unfairly pits workers and ecosystems against one another. We’ve decried how the status quo sanctifies the rights or multinational corporations to exploit and destroy – even above the democratic rights of a people determine their own economic and eological futures.

Continue reading "Follow the Climate Reality Tour!" »

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