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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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February 17, 2016

Remarks at the National Press Club Panel on the Proposed Inclusion of ISDS in the TPP

Delivered by Lise Johnson, Head: Investment Law and Policy, Columbia Center on Sustainable Investment, at the National Press Club in Washington DC on February 11, 2016

With the TPP, we are currently at a crucial crossroads. We either take this time to thoroughly evaluate ISDS and its costs and benefits, which, I believe, would take us in a new and more thoughtful direction, or we simply move forward with the TPP, entrenching and expanding a failed experiment in economic policy.

I refer to ISDS as an experiment because, although it is commonly noted that there are 3,000 investment treaties around the world and, therefore, that the ISDS mechanism is nothing new, the first investment treaty with ISDS was actually not concluded until the late 1960s. Investment treaties with ISDS were not widely negotiated until the 1990s, and ISDS claims only really emerged in earnest in the late 1990s and early 2000s. Thus, we really only have roughly 15 years of experience with this mechanism. ISDS is still a new area of law. An experiment.

I note that ISDS is a failed experiment because it does not appear to have achieved three of the commonly stated objectives of the mechanism. It has not led to increased investment flows, nor to a set of predictable international legal rights for investors, nor to an increase in the rule of law in host countries.

If the TPP were concluded with ISDS, we would not only be entrenching this failed experiment, but significantly expanding it. Currently, the US only has an investment treaty with one major capital exporting state, Canada, meaning that only a relatively small share of foreign direct investment in the US – roughly 10% -- is currently protected by a treaty with ISDS. With the TPP, the percentage of covered investment will more than double; and if we continue the trend in the TTIP as well, the amount of covered FDI in the US will rise significantly to approximately 70%, and along with it, the US’s exposure to costly litigation and liability.

Now, the US has said that the experiment has not cost the Government anything, frequently highlighting the point that it has yet to lose an ISDS case. But there are a few reasons why I don’t think we should count on the past to predict the future:

  • As I noted, the US’s exposure has been fairly limited; this will change with the TPP;
  • Second, in the cases the US has defended, the US has had near misses in which even the government officials working on the case thought the Government would lose; one explanation given for why arbitrators have been reluctant to rule against the US is that, if the US were to lose, it would back away from the system to the ultimate detriment of the arbitrators and counsel who make their living from ISDS cases. Thus, at least while the future of ISDS felt uncertain, it has been in the best interest of arbitrators to take it easy on the US.
  • Third, recent decisions reflect the significant delegation of authority under ISDS to arbitrators to interpret and apply the treaty, without any meaningful review or opportunity to appeal the arbitrators’ decisions. The tribunal in a recent case against the US, for example, stated that although all three NAFTA states unanimously agreed that the treaty meant “X”, it didn’t consider itself bound to that interpretation and proceeded to disregard it. This shows that there is no guarantee that tribunals will interpret treaty provisions in a way that is consistent with the US’s understanding of what treaty obligations mean.2
  • Fourth, the US has lost on key issues that have resulted in an expansion of exposure to future claims and damages.3

Moreover, irrespective of data on wins and losses, the system of ISDS itself is fundamentally flawed in that it creates a privileged and powerful system of protections for foreign investors that is inconsistent with, and erodes, the power of domestic law and institutions.

The USTR has defended ISDS against such charges by saying that the standards of protection investors receive under it mirror, but do not go beyond, the protections provided under domestic law and that therefore ISDS does not represent any change or threat to domestic law as we know it.4 But there are two key problems with the USTR’s assertion. One is that it is not correct that investment treaties do not provide foreign investors any greater rights than are provided under domestic law. We’ve done significant research comparing the protections provided under domestic law with those provided under investment treaties, and conclude that the protections provided under investment treaties in fact give foreign investors greater rights than they or anyone else have under domestic law.5 In fact, this seems to be why TransCanada, which is suing the US government as a result of the denial of the Keystone permit, is pursuing its major claim for $15 billion through the NAFTA as opposed to through domestic litigation.

But, even accepting the USTR’s argument that the substantive standards in investment treaties simply mirror substantive standards provided under US domestic law still does not address some of the significant concerns about ISDS. In this context, it is important to recall that ISDS allows investors to challenge actions of officials at any level of government – local, state, and federal, and conduct by any branch – executive, legislative and judicial. The fact that a measure is entirely consistent with domestic law is no defense or shield against liability.

What ISDS does is give private arbitrators the power to decide cases that, at their core, are merely questions of domestic constitutional and administrative law dressed up as treaty claims. Instead of recourse through local, state or federal domestic institutions, investors are able to take their claims to a panel of party-appointed international arbitrators and ask them to determine the bounds of proper administrative, legislative, and judicial conduct.

One might ask: what does it matter if we permit foreign investors to bring their claims against the government before international arbitrators as opposed to before domestic courts if the substantive standards of protection are the same? The answer is that it matters a great deal.

  • One, there is no route for a meaningful appeal. Even if a tribunal gets the law or facts wrong, its decision will likely stand;
  • Two, the decision makers in ISDS are free of the requirements of independence, impartiality, and high ethical standards that are mandatory for US judges;
  • Three, in domestic litigation, if a court issues a decision that is inconsistent with legislative intent, the legislature can pass a law correcting that decision; the legislature, however, has no power to undo or otherwise override an ISDS decision;
  • Four, the procedural rules and remedies are significantly different depending on whether an investor brings its claims through ISDS or through domestic courts, with meaningful impacts on the government’s potential exposure to claims and liability; and
  • Five, even if the law looks the similar, it is not the same. So, for example, although the TPP incorporates what superficially looks like the US’s test on regulatory expropriations, tribunals are not in any way bound to apply that test in the same manner as US courts.

Fundamentally, supranational adjudication—where the decisions of a supranational body can penetrate deep into a domestic society—is rare and raises a host of complex legal and policy questions. Much more consideration of these issues is important before we inadvertently dilute constitutional protections, weaken the judicial branch, and outsource our domestic legal system to a system of private arbitration that is isolated from essential checks and balances. This is not to say that supranational adjudication has no place in the American legal system, but rather that ISDS is an extreme, discriminatory and unnecessary version that will have undue negative effects on our domestic law and institutions.

  1. Data from the Bureau of Economic Analysis.
  2. See Lise Johnson, “New Weaknesses: Despite a major win, arbitration decisions in 2014 increase the US’s future exposure to litigation and liability,” (CCSI 2015), at p. 8, available at http://ccsi.columbia.edu/files/2013/12/9.-Johnson-New-Weaknesses-US-roundup.pdf
  3. See cases discussed Id.
  4. USTR, Fact Sheet: “Investor-State Dispute Settlement (ISDS),” (March 2015), https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2015/march/investorstate-dispute-settlement-isds (“These investment rules mirror rights and protections in the United States and are designed to provide no greater substantive rights to foreign investors than are afforded under the Constitution and U.S. law”).
  5. See, e.g., Johnson and Volkov, “Investor-State Contracts, Host-State ‘Commitments,’ and the Myth of Stability in International Law,” 24 American Review of International Arbitration 361 (2013); Lise Johnson, Lisa Sachs, and Jeffrey Sachs, “Investor-State Dispute Settlement, Public Interest, and U.S. Domestic Law,” (May 2015), available at http://ccsi.columbia.edu/files/2015/05/Investor-State-Dispute-Settlement-PublicInterest-and-U.S.-Domestic-Law-FINAL-May-19-8.pdf

November 19, 2015

New Analysis of TPP Investment Chapter: U.S. Laws Face Expanded Threats from Foreign Investors

Public Citizen's Global Trade Watch has gone carefully through the 50-plus pages of the very troubling investment chapter of the Trans-Pacific Partnership (TPP) deal –-as well as the lengthy country-specific annexes. We found that the final text is worse than we thought, with almost every remaining undecided issue left in the March 2015 leaked draft resolved by eliminating various reform proposals.

The TPP would VASTLY expand both the number of foreign investors that could use ISDS to attack U.S. policies (more than 9200 new firms, which would double the current U.S. ISDS exposure), and it would expand the kinds of ISDS cases that could be brought. Instead of reforms to scale back ISDS, for the first time the TPP would allow ISDS attacks against financial regulations investors say undermine their “reasonable expectations” and hurt their expected profits.  And TPP would be the first U.S. trade pact that would allow drug firms to demand cash compensation for claimed violations of World Trade Organization rules on creation, limitation or revocation of intellectual property rights.

Meanwhile, the reforms to the ISDS process that the administration has been advertising did not materialize. There are no new conflict interest rules. There is no appeals mechanism. There is no cap on tribunal costs or discretion about how much governments can be ordered to pay the investor. The ONLY improvement in the text from a public interest perspective is a partial carve out of tobacco control policies from ISDS attack, and that clause in part highlights how no other public health or environmental policies are similarly safeguarded. 

Please read the analysis here: http://www.citizen.org/documents/analysis-tpp-investment-chapter-november-2015.pdf

August 21, 2015

Transitions at Eyes on Trade

This blog post is a farewell of sorts.  After three years, today is my last day at Public Citizen.  In a couple weeks, I’ll be continuing to push for a more just trade model over at Sierra Club’s climate and trade program as senior policy advisor. Eyes on Trade, of course, will still be here in the good hands of my colleagues at Global Trade Watch. 

It has been a treat to have this space to amplify the call of many for a new trade model, document the damage wrought by our existing trade deals abroad and at home, fact-check dubious economic projections and predictable spin jobs for pending trade deals, spotlight the threats those deals pose to our health/environment/economy/democracy, and witness the growth of the largest, most diverse coalition ever to oppose an expansion of the trade status quo.  

I started working on trade when I realized that three lawyers in an investor-state tribunal could trump basic tenets of democracy and rule against health and environmental protections for which many of us have fought.  When I saw how a particular model of trade has contributed to the growing gulf between the rich and the rest of us.  When I realized that multinational corporations could obtain special protections that restrict consumers' access to life-saving medicines and still get away with calling it "free trade."  

Of course, one need not work on trade to know about trade.  It is little wonder that majorities of Republicans, Democrats and independents alike oppose the status quo trade pact model.  More than two decades of NAFTA, the WTO and NAFTA expansion pacts have contributed to surging U.S. trade deficits, widespread job loss, a flood of agricultural imports, downward pressure on middle-class wages and unprecedented levels of income inequality.  Behind the aggregate data lie shuttered factories, lost livelihoods and struggling communities.

These outcomes directly contradict the rosy promises made by corporate interests to sell these controversial deals to a skeptical U.S. Congress and public.  They also contradict President Obama’s stated economic agenda to revive U.S. manufacturing, boost middle-class wages and tackle inequality – an agenda that the TPP would undermine.  The Obama administration’s push for yet another NAFTA expansion deal casts a blind eye to the damaging legacy of the current trade model.

With opinion polls showing that the U.S. public is painfully aware of this legacy, the administration’s TPP push faces stiff opposition in the halls of Congress and the court of public opinion.  Turning a blind eye to the lived realities of the status quo trade model is unlikely to prove a winning strategy. 

And with that, at the risk of making this my shortest blog post to date (a perhaps not difficult feat), I bid you adieu.  It has been an honor to work with Public Citizen, and to work alongside many of you in pushing for a fair trade policy.  I look forward to continuing to do so from my new post. 

July 28, 2015

CAFTA’s Decade of Empty Promises Haunts the TPP

Ten years ago, after a flurry of backroom deal-making, Congress passed the Central America Free Trade Agreement (CAFTA).  In the dead of night.  By a single vote.  

Exactly one decade later, today trade ministers are gathering in Hawaii to try to conclude deadline-missing negotiations on the Trans-Pacific Partnership (TPP) – a sweeping deal that would expand the CAFTA model of trade across the Pacific.

In attempt to quell the controversy surrounding the TPP, the administration is recycling the same lofty promises that were used to push for passage of CAFTA: the deal would safeguard public health, spur economic prosperity at home and abroad, and protect workers, consumers, and the environment.

After 10 years of CAFTA, the emptiness of such promises is on full display. Today in Central America, life-saving medicines are more expensive due to monopoly protections that CAFTA gave to pharmaceutical corporations – protections that are slated for expansion in the TPP.  And the headlines from several CAFTA countries do not report economic prosperity, but economic instability, drug violence and forced migration.  Meanwhile, CAFTA’s labor provisions have failed to halt the assassination of dozens of Central American union workers who were trying to end unmitigated labor abuses like wage theft.  In contrast, the pact’s foreign investor privileges, which the TPP would expand, have succeeded in empowering multinational corporations to challenge domestic laws, including consumer and environmental protections.

Worse than repeating the mistakes of the past, the TPP would repeat the mistakes of CAFTA’s present.

Making life-saving medicines unaffordable

During the debate over CAFTA, health experts warned that by handing pharmaceutical firms greater monopoly protections, the deal would restrict Central Americans’ access to more affordable generic versions of life-saving drugs.

Unfortunately, they were right.  Take, for example, Kaletra, a drug used to fight HIV/AIDS.  Under CAFTA rules, Kaletra has enjoyed monopoly protections in Guatemala, making generic versions unavailable, for the entire first decade of CAFTA.  Without a generic alternative, Guatemala’s public health system pays about $130 per bottle of Kaletra.  In contrast, the generic version of Kaletra costs less than $20 per bottle, according to the Pan American Health Organization reference price.  For Guatemala’s taxpayers, paying more than six times the generic price for Kaletra under CAFTA means less money to build schools or bridges.  For Guatemala’s HIV/AIDS patients, it can mean the difference between life and death.

Like CAFTA, the TPP is slated to include extreme monopoly protections for pharmaceutical corporations.  Indeed, the deal even omits limited provisions to protect access to affordable medicines that were included the most recent U.S. free trade agreements.  That’s why Doctors without Borders has described the TPP as not only worse than CAFTA in restricting access to medicines, but “the most damaging trade agreement ever for global health.” 

Turning a blind eye to labor abuses

One decade ago, the Office of the U.S. Trade Representative sold CAFTA as the “best ever trade agreement on labor,” boasting “world class” labor provisions.  Those provisions failed to prevent the murder of 68 Guatemalan unionists over the course of seven years without a single arrest.  In 2008, the AFL-CIO and Guatemalan unions filed an official complaint under CAFTA’s labor provisions, calling for an end to the rampant anti-union violence, wage theft, and other abuses.  It was not until six years and dozens of unionist murders later that the U.S. government moved to arbitration on the case.  Today Guatemala’s union workers still endure frequent attacks with near-total impunity.

CAFTA’s labor provisions have proven similarly ineffective in the Dominican Republic, where sugar cane workers endure 12-hour workdays in hazardous conditions without receiving legally-required overtime pay.  A Spanish priest who filed an official CAFTA complaint in attempt to rectify the abuses was informed by U.S. Department of Labor officials, “Nothing is going to happen on account of not complying.”  Indeed, nothing has happened.  Despite CAFTA’s “world class” labor provisions, the Dominican Republic’s underpaid cane workers continue laboring in squalid conditions.

Why has CAFTA, like U.S. trade agreements before and since, failed to curb widespread labor abuses?   Kim Elliot, a member of the Department of Labor’s National Advisory Committee on Labor Provisions of U.S. Free Trade Agreements, recently offered this blunt explanation: the labor provisions of U.S. trade deals “are in there because they’re necessary to get deals through Congress.”  She added, “It’s really all about politics and not about how to raise labor standards in these countries.”

Now, in attempt to get the TPP through Congress, the Office of the U.S. Trade Representative is parroting the same promise it made for CAFTA, claiming that the deal would include “the highest-ever labor commitments.”  While the TPP’s labor provisions have been described as more “enforceable” than those in CAFTA, this is nothing new.  The last four U.S. Free Trade Agreements (FTAs) already included such “enforceable” terms, but still failed to end on-the-ground offenses, according to a 2014 U.S. government report.  Colombia’s unionists have faced dozens of assassinations and hundreds of death threats despite the Colombia FTA’s inclusion of TPP-like labor provisions.  And last year Peru explicitly rolled back occupational health and safety protections for workers despite the Peru FTA’s “enforceable” labor provisions.  Neither country has faced penalties under the FTAs.  It’s unclear why the TPP’s replication of such unsuccessful labor provisions should be expected to curb the systematic labor abuses in TPP countries like Vietnam, which bans independent unions, uses forced labor, and, by the Vietnamese government’s own estimate, has more than 1.75 million child laborers.

Empowering corporate attacks on consumer and environmental protections

In contrast to CAFTA’s unenforceable “protections” for workers, the deal granted highly enforceable privileges to foreign corporations.  This includes empowering them to bypass domestic courts and challenge domestic consumer and environmental protections before extrajudicial tribunals via “investor-state dispute settlement” (ISDS).

Corporations have not held back in using this controversial parallel legal system to challenge pro-consumer policies, including government efforts to keep electricity affordable.  In 2010 a U.S. energy company with an indirect, minority stake in Guatemala’s electric utility used ISDS to challenge Guatemala’s decision to lower electricity rates for consumers.  The next day, the company sold off its minority share.  A three-person ISDS tribunal generously decided to treat the firm as a protected “investor” in Guatemala and ordered the government to pay the corporation more than $32 million.  In another energy-related CAFTA case, a U.S. financial firm challenged the Dominican Republic’s decision not to raise electricity rates amid a nationwide energy crisis.  The government decided to pay the firm to drop the case in a $26.5 million settlement, reasoning that it was cheaper than continuing to pay legal fees.

CAFTA countries also face an increasing array of ISDS cases against environmental protections.  A U.S. mining company, for example, has launched a claim against the Dominican Republic for delaying and then denying environmental approval for an aggregate materials mine that the government deemed a threat to nearby water sources.  Other U.S. investors in the Dominican Republic have threatened to launch a CAFTA claim against the government for denying environmental approval for their plans to expand a gated resort.

The TPP would dramatically expand the controversial ISDS system, newly empowering more than 28,000 additional foreign-owned firms to ask private tribunals to order taxpayer compensation for commonsense environmental and consumer protections.

Fueling economic instability

Ten years ago, CAFTA proponents promised the deal would bring economic prosperity to Central America, making it “the best immigration, anti-gang, and anti-drug policy at our disposal.”  Today, CAFTA countries Honduras, El Salvador, and Guatemala are plagued by drug-related gang violence and forced migration.  While the causes are many, “economic stagnation” has fed the crisis, according to the U.S. State Department.  CAFTA clearly failed to deliver on its promise of economic growth for the region.

Worse still, CAFTA has contributed to the region’s economic instability.  Before the razor-thin passage of CAFTA, development organizations warned that the deal could lead to the displacement of the family farmers that constitute a significant portion of Central America’s workforce, by forcing them to directly compete with highly-subsidized U.S. agribusiness.  Indeed, agricultural imports from the United States in Honduras, El Salvador, and Guatemala have doubled since the deal went into effect, while the countries’ agricultural trade balance with the United States has dropped, spelling farmer displacement. 

And despite promises that CAFTA would make up for rural job loss by creating new jobs in apparel factories, apparel exports to the United States from Honduras, El Salvador, and Guatemala have actually fallen $1.6 billion, or 21 percent, since the year before CAFTA took effect.  Not only has the promise of new factories disappeared – so have existing factories.  

If the TPP were to take effect, the apparel jobs of Central America would be expected to decline even quicker, contributing to further economic instability.  That’s because the TPP includes Vietnam, a major apparel exporter where independent unions are banned and where the minimum wage averages less than 60 cents an hour – a fraction of the minimum wages in Central America (or even in China).  Central America is already losing the race to the bottom.  It will only fall further behind if the TPP makes Vietnam the newest low-wage competitor. 

The promise-defying track record of CAFTA need not be repeated.  When the TPP negotiators meeting today in a resort hotel in Hawaii finish this round of negotiations, we are likely to hear a familiar litany of promises about how the TPP would benefit consumers, workers, and the environment.  With those promises punctured by a decade of CAFTA’s stark realities, we have a unique opportunity to say “enough is enough.” 

June 11, 2015

Why the Founding Fathers Would Oppose Fast Track

Tomorrow members of Congress plan to take a controversial, career-defining vote on Fast Tracking the largest expansion to date of the unpopular status quo trade model.  A majority of the U.S. public, most House Democrats and a sizeable bloc of House Republicans stand in opposition.

The coalition opposing Fast Track for the Trans-Pacific Partnership (TPP) is larger and more diverse than in any preceding trade policy fight, including Internet freedom advocates, family farmers, environmentalists, Main Street businesses, labor unions, feminists, faith groups, consumer advocates, development organizations, LGBT groups, and retirees. The breadth of the opposition reflects the wide scope of broadly-held goals that the sweeping TPP pact would undermine:  middle class jobsWall Street reformfood safetyInternet freedoma clean environment, and affordable healthcare, to name a few. 

But if that weren’t enough for members of Congress still on the fence, a new legal analysis reveals that the TPP may also undermine the U.S. Constitution. 

That’s the conclusion of Alan Morrison, a constitutional law professor and associate dean at George Washington University Law School who has practiced law for 45 years, taught at six law schools including Harvard, and argued 20 Supreme Court cases.

Morrison warns in a letter to Congress that the TPP’s proposed expansion of a controversial parallel legal system for foreign corporations, known as “investor-state dispute settlement” (ISDS), “improperly removes a core judicial function from the federal courts and therefore violates Article III of the Constitution.” 

TPP’s expansion of ISDS would newly empower thousands of foreign corporations to bypass the entire U.S. legal system and challenge U.S. laws before private international tribunals comprised of three attorneys.  

These three individuals would not be constitutionally appointed and salaried U.S. judges, but private lawyers who are paid by the hour.  As Morrison points out, "many of those who serve as arbitrators in one ISDS case represent investors challenging governments in another."  The three ISDS lawyers, though acting like a court, would not be bound by a system of legal precedent.  They would be authorized to rule against U.S. laws and order U.S. taxpayer compensation in decisions that could not be appealed on the merits or reviewed in U.S. courts.

If you think that the Founding Fathers might have frowned on this system, you’re not alone.  The U.S. Constitution states in Article III that U.S. courts, presided over by salaried U.S. judges, have judicial authority over challenges to U.S. laws.  Instead, the TPP would empower an ad-hoc group of three bill-by-the-hour private lawyers operating outside of the U.S. legal system to issue binding decisions on corporate challenges to U.S. laws. 

Morrison concludes, “The Administration owes it to Congress and the American people to explain how the Constitution allows the United States to agree to submit the validity of its federal, state, and local laws to three private arbitrators, with no possibility of review by any U.S. court.”

The TPP’s expansion of this constitutional aberration would threaten the policies that we rely on for a clean environment, stable economy and healthy communities.  Since ISDS tribunals, unlike U.S. judges, are not bound by legal precedent or substantive appeal, they are free to concoct broad governmental obligations to foreign investors and then rule against environmental, financial and health policies. 

Indeed, they are incentivized to do so, since some of the tribunalists, unlike U.S. judges, get paid and picked by those who launch the cases (i.e. foreign investors).  Imagine if the plaintiff (or defendant) in a U.S. court case got to select and pay the judge.  The more that ISDS tribunalists rule in favor of foreign investors and against government policies, the more they boost investors’ interest in launching further ISDS cases and picking them as the highly-paid tribunalists.

It is little surprise then that ISDS tribunalists have repeatedly used creative interpretations of foreign investors’ rights to rule against public interest policies under existing ISDS-enforced pacts.  This includes ISDS rulings against the Czech Republic’s decision not to bail out a bank, a Canadian province’s nondiscriminatory requirement for oil corporations to support local research and development, and a Mexican municipality’s decision not to authorize a waste facility near a nature reserve that is an UNESCO World Heritage Site and home to indigenous communities.  

Pending ISDS cases include a U.S. natural gas firm’s challenge of a Canadian moratorium on fracking, a Swedish energy company’s case against Germany’s phase-out of nuclear power after the Fukushima nuclear disaster, and Philip Morris’ ISDS attacks on anti-smoking policies from Uruguay to Australia.

While ISDS tribunals cannot directly require governments to overturn laws, their imposition of massive penalties on taxpayers can have that effect. Morrison explains: 

If a law is found to be inconsistent with an investor protection provision, it may remain in effect, but other investors could also bring claims seeking U.S. taxpayer compensation. Thus, an adverse arbitral decision under TPP may well result in repeal or amendment of the offending law…Indeed, the mere instigation of an ISDS proceeding has resulted in other governments, including Germany and Canada, reversing specific regulatory decisions as part of compensation packages for investors.

The TPP would dramatically expand the threat posed by this constitutionally-suspect system, as the deal would roughly double U.S. exposure to ISDS attacks against U.S. laws.  The TPP would newly empower more than 1,000 additional corporations in TPP countries, which own more than 9,200 additional subsidiaries in the United States, to launch ISDS cases against the U.S. government. No other U.S. pact has subjected the United States to such an increase in ISDS liability.

What kinds of U.S. laws and regulations would be vulnerable to corporate challenge under this unprecedented expansion of U.S. ISDS liability?  Morrison spells out some examples:

  • E-cigarette regulations: “If Congress decided to regulate [e-cigarettes] after enactment of the TPP, a non-U.S. investor from a TPP country that makes e-cigarettes here could ask an ISDS panel to rule that its investment-based expectations were improperly violated and thus that it is entitled to damages under the minimum standard of treatment provisions.”
  • Water rationing for drought-stricken California: “A similar challenge could be made by a TPP investor who owned farm land in California and objected to an intensification of mandatory water rationing for farms enacted after the TPP goes into effect, even if such rules also applied to U.S. owners of land that would be adversely affected by them.”
  • A $15 minimum wage: “Or the non-U.S. TPP-owner of restaurants in Los Angeles could demand arbitration over a post TPP-enactment of an increase in the minimum wage to $15 an hour, which, he claims, violates his investment-based expectations when he decided to purchase the restaurants.”

Such TPP threats are among the many that have spurred today’s widespread opposition to Fast Track.  After years of mounting evidence that the TPP would threaten middle class stability and commonsense consumer and environmental safeguards, members of Congress have plenty of reasons to vote “no” on Fast Track tomorrow.  But for those who need yet another reason, the TPP’s apparent violation of the U.S. Constitution should suffice.   

May 07, 2015

Seven Corporations that Could Sponsor Obama’s Controversial Trade Deal (If His Nike Endorsement Falls Flat)

President Obama apparently has a flair for irony. He selected the headquarters of offshoring pioneer Nike as the place to pitch the controversial Trans-Pacific Partnership (TPP) trade deal in a major speech on Friday. As Obama tries to sell a pact that many believe would lead to more U.S. job offshoring and lower wages, why would he honor a firm that has grown and profited not by creating U.S. jobs, but by producing in offshore sweatshops with rock bottom wages and terrible labor conditions?

Less than 1 percent of the 1 million workers who made the products that earned Nike $27.8 billion in revenue in 2014 were U.S. workers. NikeLast year, one-third of Nike’s 13,922 U.S. production workers were cut. Most Nike goods, and all Nike shoes, are produced overseas, by more than 990,000 workers in low-wage countries whose abysmal conditions made Nike a global symbol of sweatshop abuses.

This includes more than 333,000 workers in Nike-supplying factories in TPP nation Vietnam, where the average minimum wage is less than 60 cents per hour and where workers have faced such abuses as supervisors gluing their hands together as a punishment. Instead of requiring Nike to pay its Vietnamese workers more or ending the abuse they endure, the TPP would allow Nike to make even higher profits by importing goods from low-wage Vietnam instead of hiring U.S. workers.

If using an offshoring pioneer to rally support for the beleaguered TPP does not succeed for some reason, here are seven other U.S. corporations that Obama might consider as equally fitting backup options

1.      Philip Morris

Sure, Philip Morris International – the world’s second-largest tobacco corporation – may not be the world’s most-loved corporation, but Obama would find an enthusiastic TPP corporate sponsor in the firm.  Philip Morris has explicitly lobbied for controversial TPP provisions that would Philip Morrisempower multinational corporations to bypass domestic courts, go before extrajudicial tribunals of three private lawyers, and challenge domestic laws that millions of people rely on for a clean environment, a stable economy, and healthy communities. Indeed, Philip Morris is already using this parallel corporate legal system, known as “investor-state dispute settlement,” to attack landmark anti-smoking policies from Australia to Uruguay. The TPP would newly empower thousands of multinational corporations to launch “investor-state” attacks against countries’ health, environmental and financial protections. In one fell swoop, the deal would roughly double U.S. exposure to “investor-state” attacks against U.S. policies.

2.      Goldman Sachs  (and other Wall Street firms)

If Obama’s Nike promo falls flat, maybe he should turn to a Wall Street bank as the next TPP corporate cheerleader. It’s no surprise that Wall Street firms like Goldman Sachs love the TPP.  The deal includes
Wall Stbinding rules, written before the financial crisis under the advisement of the banks themselves, that would require domestic policies to conform to the now-rejected model of deregulation that led to financial ruin. And for the first time, the TPP would empower some of the world’s largest 20 banks to directly challenge new U.S. financial protections before extrajudicial tribunals on the basis that the regulations frustrated the banks' "expectations."

3.      Pfizer  (and other Big Pharma corporations)

Pharmaceutical corporations like Pfizer are likely candidates for further corporate TPP-peddling given that the pharmaceutical industry has lobbied for the TPP more than any other. Small wonder – the deal offers pharmaceutical corporations a buffet of handouts that would allow them to raise medicine prices Pfizerwhile restricting consumers’ access to cheaper generic drugs. One TPP chapter would give pharmaceutical firms expanded monopoly protections that would curb access to essential medicines in TPP countries like Vietnam, where it is projected that 45,000 HIV patients would no longer be able to afford life-saving treatment. Another TPP chapter would establish new restrictions on government efforts to cut medicine costs for taxpayer-funded programs such as Medicare, Medicaid and veterans' health programs. A third TPP chapter would empower foreign pharmaceutical corporations to directly attack domestic patent and drug-pricing laws in extrajudicial tribunals.

4.      ExxonMobil  (and other fracking corporations)

Maybe Obama’s next TPP photo op should be in front of a natural gas fracking drill owned by TPP-supporting ExxonMobil, the world’s largest publicly traded natural gas corporation. Natural gas firms are hopeful about TPP provisions likely to spur a surge in natural gas exports. For the rest of us, that would Frackingmean an expansion of dirty fracking and an increase in electricity costs. Implementing the TPP would require the U.S. Department of Energy to automatically approve natural gas exports to TPP countries, waiving its prerogative to determine whether those exports, and the resulting incentive for more fracking, would be in the public interest. As states like New York ban fracking to protect against health and environmental dangers, the TPP would move in the opposite direction. Indeed, the TPP would open the door to more “investor-state” attacks on anti-fracking protections, like the one Lone Pine Resources has launched against a Canadian fracking moratorium that prevents the firm from fracking under the Saint Lawrence Seaway.

5.      Time Warner  (and other Hollywood corporations)

Hollywood corporations like Time Warner Inc. already have been partnering closely with the Obama administration in stumping for the TPP – recent leaks reveal that the Motion Picture Association of HollywoodAmerica literally has asked the administration to vet the corporate alliance’s pro-TPP statements. The corporations are pining for stringent TPP copyright protections that could threaten Internet freedom by pushing Internet service providers to police everyday content sharing, resulting in blocked or censored websites. Leaked proposals for the deal would even make the common, non-commercial sharing of copyrighted content (e.g. remixed songs, reposted video clips) a prosecutable crime. 

6.      Red Lobster  (and other corporations using imported fish and seafood)

U.S. chain restaurants and agribusinesses that profit from imports of fish and seafood, at the expense of U.S. independent fishers and shrimpers, could also serve as willing backers of Obama’s TPP pitch. The deal would likely reduce or eliminate U.S. tariffs on imports of more than 80 types of fish and seafood Red Lobsterproducts, increasing further the already massive flow of fish and seafood imported into the United States. Even without the TPP, the U.S. Food and Drug Administration (FDA) only physically inspects less than 1 percent of imported fish and seafood for health risks, despite that the Centers for Disease Control and Prevention has found that imported fish are the number one cause of U.S. disease outbreaks from imported food. The TPP would exacerbate this public health threat by enabling more fish and seafood imports from major exporters like Malaysia and Vietnam, where widespread fish and seafood contamination has been documented. For example, the FDA has placed 193 Vietnamese fisheries on a “red list” due to risk of salmonella contamination.

7.      Chinese Corporations in Vietnam

If Obama is willing to use Nike to promote the controversial TPP despite its reliance on low-wage labor in Vietnam, maybe he’d be willing to also solicit TPP endorsements from the Chinese corporations that are setting up shop in Vietnam in hopes of using the TPP to undercut U.S. businesses. The Chinese and Vietnam factoryVietnamese press report that many Chinese textile and apparel firms are now building factories in Vietnam in hopes of taking advantage of the TPP’s planned phase-out of U.S. tariffs on apparel imported from Vietnam. This not only would place U.S. textile producers in direct competition with Chinese-owned firms using low-wage labor in Vietnam, but also would eliminate the jobs of workers in Mexico and Central America who now make the clothes that were made in the United States before the North American Free Trade Agreement and Central America Free Trade Agreement. In addition, the TPP’s gutting of Buy American policies would newly empower Chinese firms operating in Vietnam to undercut U.S. businesses to get contracts for goods bought by the U.S. government, paid for by U.S. taxpayers. For all firms operating in TPP countries like Vietnam, the United States would agree to waive "Buy American" procurement policies that require most federal government procurement contracts to go to U.S. firms, offshoring U.S. tax dollars to create jobs abroad. 

April 15, 2015

Cato and Public Citizen: No parallel legal system for foreign corporations

Here's something you won't see every day: an op-ed jointly written by analysts at Public Citizen and the Cato Institute.  Often divided on issues of trade policy, we find common ground in opposing the proposed expansion, via the Trans-Pacific Partnership, of a shadow legal system for foreign corporations.  Read about it in today's The Hill.  Here's an excerpt:

Special courts for foreign investors

By Simon Lester and Ben Beachy

On the precipice of the biggest congressional trade debate in decades, a once-arcane investment provision has become a lightning rod of controversy in the intensifying battle over whether Congress should revive Trade Promotion Authority (TPA), also known as “fast track,” for the Trans-Pacific Partnership (TPP). Sen. Elizabeth Warren (D-Mass.) calls this provision a system of “rigged, pseudo-courts.” The Republican leadership of the House Ways and Means Committee defends it as “a vital part of any trade agreement.”

But this is not your standard partisan congressional battle. Inside Congress and out, criticism and support for this parallel legal system, known as investor-state dispute settlement (ISDS), crosses the political spectrum. Analysts with the Cato Institute and Public Citizen usually stand on opposing sides of trade policy issues, but we find common ground in opposing this system of special privileges for foreign firms.

The TPP would extend this controversial system, found in some existing trade pacts and investment treaties, to new countries and tens of thousands of new companies. Under ISDS, “foreign investors” – mostly transnational corporations – have the ability to bypass U.S. courts and challenge U.S. government action and inaction before international tribunals authorized to order U.S. taxpayer compensation to the firms.

Pacts with ISDS are often promoted as simply prohibiting discrimination against foreign firms. In reality, they go well beyond non-discrimination, and create amorphous government obligations that have given rise to corporate lawsuits against a wide array of policies with relevance across the political spectrum. Foreign corporations have used this system to challenge policies ranging from the phase-out of nuclear power to the roll-back of renewable energy subsidies. Nearly all government actions and inactions are subject to challenge, covering local, state, and federal measures taken by courts, legislators and regulators.

Take, for example, the recent U.S. Supreme Court rulings that companies cannot patent human genes or obtain abstract software patents favored by patent trolls. Foreign holders of those patents could use ISDS to claim that these decisions interfere with their patent rights and ask an international tribunal to order compensation from the U.S. government...

Click here for the full op-ed from The Hill

April 10, 2015

50 Reasons We Cannot Afford the TPP

How would your state be impacted by the Trans-Pacific Partnership (TPP) – a controversial “free trade” agreement (FTA) being negotiated behind closed doors with 11 Pacific Rim countries? 

Click here for a state-by-state guide to the specific outcomes of the status quo “trade” model that the TPP would expand.  Get the latest government data on how many jobs have been lost in your state to unfair trade, how much inequality has risen, how many family farms have disappeared, and how large your state’s trade deficit with FTA countries has grown. 

The TPP would extend the North American Free Trade Agreement (NAFTA) model that has contributed to massive U.S. trade deficits and job loss, downward pressure on middle class wages, unprecedented levels of inequality, lagging exports, new floods of agricultural imports, and the loss of family farms.

These impacts have been felt across all 50 U.S. states.  Here is a sampling of the outcomes:

  • North Carolina: North Carolina has lost more than 369,000 manufacturing jobs – nearly half – since NAFTA and NAFTA expansion pacts have taken effect.  More than 212,000 specific North Carolina jobs have been certified under just one narrow Department of Labor program as lost to offshoring or imports since NAFTA.
  • Delaware: Delaware’s total goods exports to all U.S. FTA partners have actually fallen 27 percent while its exports to non-FTA nations have grown 34 percent in the last five years. 
  • California: In the last five years, California’s $403 million NAFTA agricultural trade surplus became a $187 million trade deficit – a more than $590 million drop. In contrast, California’s agricultural trade surplus with the rest of the world increased by $3 billion, or 79 percent, during the same time period.  The disparity owes to the fact that California’s exports of agricultural products to NAFTA partners Mexico and Canada grew just 27 percent, or $693 million, in the last five years, while its agricultural exports to the rest of the world grew 70 percent, or $4.3 billion. Meanwhile, California’s agricultural imports from NAFTA partners during this period surged $1.3 billion – more than the increase in agricultural imports from all other countries combined.
  • Michigan: Michigan’s trade deficit with all U.S. FTA partners is nearly five times larger than its deficit with the rest of the world. Michigan’s FTA deficit has grown more than three times as much as its non-FTA deficit in the last five years. Today, Michigan’s trade deficit with FTA partners comprises 83 percent of the state’s total trade deficit.
  • Louisiana: Before the Korea FTA – the U.S. template for the TPP – the United States had balanced trade with Korea in the top 10 products that Louisiana exports to Korea – including everything from metal to agricultural products. Under two years of the FTA, that balance became a $9 billion annual trade deficit. 
  • New York: The TPP and the Trans-Atlantic Free Trade Agreement (TAFTA) would empower 3,067 foreign corporations doing business in New York to bypass domestic courts, go before extrajudicial tribunals, and challenge New York and U.S. health, environmental and other public interest policies that they claim undermine new foreign investor rights not available to domestic firms under U.S. law.
  • Texas: U.S. farmers were promised that the Korea FTA would boost U.S. agricultural exports to Korea. But U.S. exports to Korea fell in eight of Texas’ top 10 agricultural export products, from cotton to wheat to meat in the first two years of the Korea FTA.  Meanwhile, U.S. exports to Korea of beef, pork and poultry – all top agricultural exports for Texas – declined 18, 15, and 42 percent, respectively (measuring by volume).
  • Nevada: The richest 10 percent of Nevadans are now capturing more than half of all income in the state – a degree of inequality not seen in the 100 years for which records exist.  Study after study has produced an academic consensus that status quo trade has contributed to today’s unprecedented rise in income inequality.  
  • Minnesota: Small-scale U.S. family farms have been hardest hit by rising agricultural imports and declining agricultural trade balances under FTAs.  Since NAFTA took effect, 15,500 of Minnesota’s smaller-scale farms (24 percent) have disappeared.

March 25, 2015

TPP Leak Reveals Extraordinary New Powers for Thousands of Foreign Firms to Challenge U.S. Policies and Demand Taxpayer Compensation

Unveiling of Parallel Legal System for Foreign Corporations Will Fuel TPP Controversy, Further Complicate Obama’s Push for Fast Track

The Trans-Pacific Partnership’s (TPP) Investment Chapter, leaked today, reveals how the pact would make it easier for U.S. firms to offshore American jobs to low-wage countries while newly empowering thousands of foreign firms to seek cash compensation from U.S. taxpayers by challenging U.S. government actions, laws and court rulings before unaccountable foreign tribunals. After five years of secretive TPP negotiations, the text – leaked by WikiLeaks –proves that growing concerns about the controversial “investor-state dispute settlement” (ISDS) system that the TPP would extend are well justified.

Enactment of the leaked chapter would increase U.S. ISDS liability to an unprecedented degree by newly empowering about 9,000 foreign-owned firms from Japan and other TPP nations operating in the United States to launch cases against the government over policies that apply equally to domestic and foreign firms. To date, the United States has faced few ISDS attacks because past ISDS-enforced pacts have almost exclusively been with developing nations whose firms have few investments here.

The leak reveals that the TPP would replicate the ISDS language found in past U.S. agreements under which tribunals have ordered more than $3.6 billion in compensation to foreign investors attacking land use rules; water, energy and timber policies; health, safety and environmental protections; financial stability policies and more. And while the Obama administration has sought to quell growing concerns about the ISDS threat with claims that past pacts’ problems would be remedied in the TPP, the leaked text does not include new safeguards relative to past U.S. ISDS-enforced pacts. Indeed, this version of the text, which shows very few remaining areas of disagreement, eliminates various safeguard proposals that were included in a 2012 leaked TPP Investment Chapter text.

“With the veil of secrecy ripped back, finally everyone can see for themselves that the TPP would give multinational corporations extraordinary new powers that undermine our sovereignty, expose U.S. taxpayers to billions in new liability and privilege foreign firms operating here with special rights not available to U.S. firms under U.S. law,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “This leak is a disaster for the corporate lobbyists and administration officials trying to persuade Congress to delegate Fast Track authority to railroad the TPP through Congress.”

Even before today’s leak, U.S. law professors and those in other TPP nations, the U.S. National Conference of State Legislatures, the Cato Institute and numerous members of Congress and civil society groups have announced opposition to the ISDS system, which would elevate individual foreign firms to the same status as sovereign governments and empower them to privately enforce a public treaty by skirting domestic courts and “suing” governments before extrajudicial tribunals. The tribunals are staffed by private lawyers who are not accountable to any electorate, system of legal precedent or meaningful conflict of interest rules. Their rulings cannot be appealed on the merits. Many ISDS lawyers rotate between roles – serving both as “judges” and suing governments for corporations, creating an inherent conflict of interest.

The TPP’s expansion of the ISDS system would come amid a surge in ISDS cases against public interest policies that has led other countries, such as South Africa and Indonesia, to begin to revoke their ISDS-enforced treaties. While ISDS agreements have existed since the 1960s, just 50 known ISDS cases were launched worldwide in the regime’s first three decades combined. In contrast, foreign investors launched at least 50 ISDS claims each year from 2011 through 2013. Recent cases include Eli Lilly’s attack on Canada’s cost-saving medicine patent system, Philip Morris’ attack on Australia’s public health policies regulating tobacco, Lone Pine’s attack on a fracking moratorium in Canada, Chevron’s attack on an Ecuadorian court ruling ordering payment for mass toxic contamination in the Amazon and Vattenfall’s attack on Germany’s phase-out of nuclear power.

“By definition, only multinational corporations could benefit from this parallel legal system, which empowers them to skirt domestic courts and laws, and go to tribunals staffed by highly paid corporate lawyers, where they grab unlimited payments of our tax dollars because they don’t want to comply with the same laws our domestic firms follow,” Wallach said.

Public Citizen’s analysis of the leaked text is available here

January 28, 2015

10 Tall Tales on Trade: Fact-Checking Obama’s Top Trade Official

Yesterday was a difficult day for U.S. Trade Representative (USTR) Michael Froman.  He had to go before Congress and explain how the administration’s plan to expand a trade model that has offshored U.S. manufacturing jobs and exacerbated middle class wage stagnation fits with President Obama’s stated “middle class economics” agenda.

Inconveniently for Mr. Froman, it does not.

That did not stop Froman from trying to paint the last two decades of Fast-Tracked, pro-offshoring trade deals – and the administration’s plan for more of the same – as a gift to the middle class. 

The facts he cited to support this depiction actually sounded great.  They just didn’t have the added advantage of being true. 

Here’s a rundown of the top 10 fibs and half-truths that Froman uttered before the Senate Finance Committee and House Ways and Means Committee yesterday in his sales pitch for the administration’s bid to expand the NAFTA “trade” pact model by Fast-Tracking through Congress the controversial Trans-Pacific Partnership (TPP).

1. Fast Track Puts Congress in the Driver’s Seat (of a Runaway Car, without Brakes or a Steering Wheel)

Froman: “[Fast Track] puts Congress in the driver’s seat to define U.S. negotiating objectives and priorities for trade agreements.”

Okay, let’s go with this analogy.  If reviving Fast Track puts Congress in the driver’s seat, it also removes the brakes and steering wheel.  Reviving Fast Track would empower the administration to negotiate and sign a sweeping “trade” pact like the TPP – implicating everything from the cost of medicines to the safety of food to the reform of Wall Street – before Congress had any enforceable say over the deal’s contents, even if they contradicted Congress’ stated negotiating objectives.  Goodbye steering wheel.  Congress’ role would be relegated to an expedited, no-amendments, limited-debate vote on the already-signed deal.  Goodbye brakes. 

Also, if we’re talking about Fast Tracking the TPP, the car is already going 60mph.  As a couple of members of Congress pointed out to Froman, the administration has been negotiating the TPP for more than five years, and Froman himself stated that TPP negotiations are in their endgame.  Even if Froman’s assertion were true that Fast Track allows Congress to define priorities for trade agreements (rather than ensuring that such priorities are not enforceable), it’s a little late for members of Congress to be naming priorities for a deal that has been under negotiation since 2009 and that Froman hopes to close in the coming months.

2. A Trade Surplus with Our FTA Partners (Does Not Appear in Official Government Data)

Froman: “You take all of our FTA partners as a whole, [and] we have a trade surplus. And that trade surplus has grown.”  Froman also claimed that the United States has a trade surplus in manufactured goods with its FTA partners.  And he tried to use red herrings to explain away the surging U.S. trade deficit with Korea under the Korea FTA.

These claims defy official U.S. government data.  Data from the U.S. International Trade Commission show that the United States has a $180 billion U.S. goods trade deficit with all free trade agreement (FTA) partners (in 2013, the latest year on record).  In manufactured goods, the United States has a $51 billion manufacturing trade deficit with all FTA partners.  Froman claimed otherwise, in part, by counting billions of dollars’ worth of "foreign exports" – goods produced abroad that simply pass through the United States without alteration before being “re-exported.”  These goods, by definition, do not support U.S. production jobs.

Contributing to our FTA deficit is the 50 percent surge in the U.S. goods trade deficit with Korea in just the first two years of the Korea FTA, which literally was used as the U.S. template for the TPP. This deficit increase, owing to a drop in exports and rise in imports, spells the loss of more than 50,000 American jobs in the FTA's first two years, according to the ratio used by the administration to claim the pact would create jobs. Froman tried to explain away the ballooning U.S. trade deficit under the Korea FTA as due to decreases in corn and fossil fuel exports.  But even if discounting both corn and fossil fuels, U.S. annual exports to Korea still fell under the FTA, and the annual trade deficit with Korea still soared.  Product-specific anomalies cannot explain away the broad-based downfall of U.S. exports to Korea under the FTA, which afflicted nine of the top 15 U.S. sectors that export to Korea. The disappointing results also cannot be blamed on low growth in Korea since the FTA.  Though Korea's growth rates in the last several years have not been spectacular, the economy has still grown since the FTA (3 percent in 2013), as has consumption (2.2 percent, adjusted for inflation, in 2013). Koreans are buying more goods, just not U.S. goods. 

 

3.  We Wish to Ensure Access to Affordable Medicines in the TPP (but Big Pharma Won’t Let Us)

Froman: “In negotiations, like TPP, we are working to ensure access to affordable life-saving medicines, including in the developing world, and create incentives for the development of new treatment and cures that benefit the world and which create the pipeline for generic drugs.”

These words play politics with people’s lives. They cloak the tragic reality that if the TPP would take effect as USTR has proposed, with leaks showing even greater monopoly protections for pharmaceutical corporations than in prior pacts, people would needlessly die for lack of access to affordable medicines. A new study finds, for example, that the TPP would dramatically reduce the share of Vietnam’s HIV patients who have access to life-saving antiretroviral medicines.  The study reveals that while 68 percent of Vietnam’s eligible HIV patients currently receive treatment, U.S.-proposed monopoly protections for pharmaceutical corporations in the TPP would allow only 30 percent of Vietnam’s HIV patients to access antiretrovirals.  As a result, an estimated 45,000 people with HIV in Vietnam who currently receive antiretroviral treatment would no longer be able to afford the life-saving drugs.

Froman also indicated in the Senate hearing that USTR is pushing to include a special monopoly protection for pharmaceutical firms that contradicts the Obama administration’s own stated objectives for reducing the cost of medicines in the United States. President Obama’s budget proposes to reduce a special monopoly protection for pharmaceutical firms with regard to biologic medicines – drugs used to combat cancer and other diseases that cost approximately 22 times more than conventional medicines.  To lower the exorbitant prices and the resulting burden on programs like Medicare and Medicaid, the Obama administration’s 2015 budget would reduce the period of Big Pharma's monopoly protection for biologics from 12 to seven years. The administration estimates this would save taxpayers more than $4.2 billion over the next decade just for federal programs. However, Froman suggested yesterday that USTR continues to push for the 12 years of corporate protection in the TPP, which would lock into place pharmaceutical firms’ lengthy monopolies here at home while effectively scrapping the administration’s own proposal to save billions in unnecessary healthcare costs.

4. Most Exporters are Small Businesses (that Have Endured Slow and Falling Exports under FTAs)

Froman: “15,600 firms export from Pennsylvania. Almost 90 percent of them are small and medium sized businesses. And the question is whether with these trade agreements we can create more opportunities for these kinds of businesses.”

Implying that exporting is mainly the domain of small businesses because they make up most exporting firms is like implying that the NBA is a league of short people because most NBA players are shorter than 7 feet tall.  The reason small and medium enterprises (defined as 500 employees or less) comprise most U.S. exporting firms is simply because they constitute 99.7 percent of U.S. firms overall (in the same way that those of us below 7 feet constitute more than 99 percent of the U.S. population).  The more relevant question is what share of small and medium firms actually depend on exports for their success. Only 3 percent of U.S. small and medium enterprises export any good to any country. In contrast, 38 percent of large U.S. firms are exporters.  Even if FTAs actually succeeded in boosting exports (which they don’t, per the government data noted below), exporting is primarily the domain of large corporations, not small businesses.

As for whether “with these trade agreements we can create more opportunities” for small firms, the record of past FTAs suggests not. Under the Korea FTA, U.S. small businesses have seen their exports to Korea decline even more sharply than large firms (a 14 percent vs. 3 percent downfall in the first year of the FTA). And small firms’ exports to Mexico and Canada under NAFTA have grown more slowly than their exports to the rest of the world. Small businesses’ exports to all non-NAFTA countries grew over 50 percent more than their exports to Canada and Mexico (74 percent vs. 47 percent) during a 1996-2012 window of data availability. The sluggish export growth owes in part to the fact that small businesses’ exports grew less than half as much as large firms’ exports to NAFTA partners (47 percent vs. 97 percent from 1996-2012).

5. We Try to Be Transparent (with the Corporate Advisors Who Can Access Secret Texts)

Froman: “And to ensure these agreements are balanced, we seek a diversity of voices in America’s trade policy. The Administration has taken unprecedented steps to increase transparency… We have held public hearings soliciting the public’s input on the negotiations and suspended negotiating rounds to host first-of-a-kind stakeholder events so that the public can provide our negotiators with direct feedback on the negotiations.”

“A diversity of voices” is an odd way to describe the more than 500 official trade advisors with privileged access to secretive U.S. trade texts and U.S. trade negotiators.  About nine out of ten of these advisors explicitly represent industry interests. Just 10 of the more than 500 advisors (less than 2 percent) represent environmental, consumer, development, food safety, financial regulation, Internet freedom, or public health organizations.  It’s little wonder that so many of these groups, excluded from setting the content of the TPP, have denounced leaked TPP texts as presenting threats to the public interest.  And as for the claim of “unprecedented steps to increase transparency,” the reality is closer to the opposite. When the Bush administration negotiated the last similarly sweeping trade pact – the Free Trade Area of the Americas – USTR published the negotiating text online for anyone to see amid negotiations. In a step backwards from the degree of transparency exhibited by the Bush administration, the Obama administration has refused repeated calls from members of Congress and civil society organizations to release TPP texts. This secrecy limits the utility of the public hearings and stakeholder events that Froman touts, as it is difficult to opine on a text you are prohibited from seeing.

6. Supporting Manufacturing and Higher Wages (Is a Goal in Spite of Our Trade Policies)

Froman: “In 2015, the Obama Administration will continue to pursue trade policies aimed at supporting the growth of manufacturing and associated high-quality jobs here at home and maintaining American manufacturers’ competitive edge.”

The only objectionable word in this sentence is “continue.” Since NAFTA, we have endured a net loss of nearly 5 million manufacturing jobs – one out of every four – and more than 57,000 manufacturing facilities. While not all of those losses are due to NAFTA, the deal’s inclusion of special protections for firms that relocate abroad certainly contributed to the hemorrhaging of U.S. manufacturing. The U.S. manufactured goods trade balance with Canada and Mexico in NAFTA’s first 20 years changed from a $5 billion surplus in 1993 to a $64.9 billion deficit in 2013. The U.S. Department of Labor has certified (under one narrow program) more than 845,000 specific U.S. workers – many of them in manufacturing – as enduring “trade-related” job losses since NAFTA due to the offshoring of their factories to Mexico or Canada, or import competition from those countries. And under just two years of the Korea FTA, U.S. manufacturing exports to Korea have fallen. Overall, the United States has a $51 billion trade deficit in manufactured goods with its 20 FTA partners. Reviving manufacturing and reviving Fast Track for the NAFTA-expanding TPP are incompatible.

Froman: “At a time when too many workers haven't seen their paychecks grow in much too long, these jobs typically pay up to 18% more on average than non-export related jobs.” 

Froman neglects to mention a key reason that too many workers haven’t seen their paychecks grow: NAFTA-style deals have not only incentivized the offshoring of well-paying U.S. manufacturing jobs, but forced these workers to compete for lower-paid service sector jobs, which has contributed to downward pressure on wages even in non-offshoreable sectors.  According to the U.S. Bureau of Labor Statistics, about three out of every five displaced manufacturing workers who were rehired in 2014 experienced a wage reduction. About one out of every three displaced manufacturing workers took a pay cut of greater than 20 percent. As increasing numbers of American workers, displaced from better-paying jobs by current trade policies, have joined the glut of workers competing for non-offshoreable jobs in retail, hospitality and healthcare, real wages have actually been declining in these growing sectors. A litany of studies has produced an academic consensus that such trade dynamics have contributed to the historic increase in U.S. income inequality – the only debate is the degree to which trade is to blame. The TPP would not only replicate, but actually expand, NAFTA’s extraordinary privileges for firms that relocate abroad and eliminate many of the usual risks that make firms think twice about moving to low-wage countries like Vietnam – a TPP negotiating partner where minimum wages average less than 60 cents an hour, making the country a low-cost offshoring alternative to even China.

7. The TPP Supports an Internet that Is Open (to Lawsuits for Common Online Activity)

Froman: "We will continue to support a free and open Internet that encourages the flow of information across the digital world."

Repetition of this platitude has failed to assuage the concerns of Internet freedom groups that point out that leaked TPP texts do not support Froman’s assurances. In a July 2014 letter, an array of Internet service providers, tech companies, and Internet freedom groups wrote to Froman about leaked TPP copyright terms, some of which resemble provisions in the defeated Stop Online Piracy Act (SOPA), which could “significantly constrain legitimate online activity and innovation.”  Noting the deal’s terms on Internet service provider liability, the groups stated, “We are worried about language that would force service providers throughout the region to monitor and policy their users’ actions on the internet, pass on automated takedown notices, block websites and disconnect Internet users.”

8. Our Exports Have Grown (More Quickly to Non-FTA Countries)

Froman: “Our total exports have grown by nearly 50 percent and contributed nearly one-third of our economic growth since the second quarter of 2009. In 2013, the most recent year on record, American exports reached a record high of $2.3 trillion...” “By opening rapidly expanding markets with millions of new middle-class consumers in parts of the globe like the Asia-Pacific, our trade agreements will help our businesses and workers access overseas markets...”

U.S. goods exports grew by a grand total of 0 percent in 2013.   The year before that, they grew by 2 percent.  As a result, the administration utterly failed to reach President Obama’s stated goal to double U.S. exports from 2009 to 2014. Most of the export growth Froman cites – which is less than half of the administration’s stated objective – 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).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  In the first two years of the Korea FTA, U.S. exports to Korea have fallen 5 percent.  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. 

And if we’re seeking to export to those countries that are growing the fastest, then the TPP is the wrong trade pact.  Of the TPP countries with which we do not already have an FTA, all but one are actually growing more slowly than the per capita growth rate of the East Asian and Pacific region overall.     

9. Increases in Food Exports (Have Been Swamped by a Surge in Food Imports)

Froman: “In 2013, U.S. farmers and ranchers exported a record $148.7 billion of food and agricultural goods to consumers around the world.”

Yes, U.S. food exports have increased, but not nearly as much as food imports. In 2013, the total volume of U.S. food exports stood just 0.5 percent higher than in 1995, while imports of food into the United States had more than doubled (growing 115 percent since 1995). Existing FTAs have contributed to the imbalanced food trade. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. And under the first two years of the Korea FTA, U.S. agricultural exports to Korea plummeted 34 percent. Smaller-scale U.S. family farms have been hardest hit. About 170,000 small U.S. family farms have gone under since NAFTA and NAFTA expansion pacts have taken effect, a 21 percent decrease in the total number.

10. The TPP Takes Heed of NAFTA’s Mistakes (and Builds on Them)

Froman: “I think the President has made clear that as we pursue a new trade policy, we need to learn from the experiences of the past and that’s certainly what we’re doing through TPP and the rest of our agenda. For example, when he was running for President, he said we ought to renegotiate NAFTA. What that meant was to make labor and environment not side issues that weren’t enforceable, but to bring labor and environment in the core of the agreement and make them enforceable just like any other provision of the trade agreement consistent with what Congress and the previous administration worked out in the so-called May 10th agreement.”

When candidate Obama said in 2008 that he would renegotiate NAFTA – a pact that had become broadly unpopular for incentivizing the offshoring of U.S. manufacturing jobs – most people probably didn’t imagine that he meant expanding those offshoring incentives further. But the TPP would extend further NAFTA’s extraordinary privileges for firms that relocate abroad to low-wage countries (like TPP negotiating partner Vietnam).  Most people also probably would not expect “learning from the experiences of the past” to lead to an expansion of the monopoly protections that NAFTA gave to pharmaceutical corporations, thereby reducing the availability of generics and increasing the cost of medicines. But Froman himself stated yesterday that such corporate protections – antithetical to textbook notions of “free trade” – are part of the TPP’s NAFTA-plus provisions.

And though Froman touts the May 10 deal as an improvement over NAFTA for labor rights, a recent government report has shown the May 10 provisions to be ineffective at curbing labor abuses in FTA partner countries. A November 2014 report from the U.S. Government Accountability Office found broad labor rights violations across all five surveyed FTA partner countries, regardless of whether or not the FTA included the labor provisions of the vaunted May 10 deal, including unionist murders in Colombia and impunity for union-busting in Peru.  Several of the TPP negotiating partners are notorious labor rights abusers – four of them were cited in a recent Department of Labor report for using child and/or forced labor. Vietnam, meanwhile, outright bans independent unions. Why would incorporation of the same terms that have failed to curb labor abuses in existing FTAs be expected to end the systematic labor rights abuses of TPP partners? 

And despite the May 10 deal’s environmental provisions, the TPP’s extraordinary investment provisions would empower thousands of foreign firms to bypass domestic courts, go before extrajudicial tribunals, and challenge new domestic environmental protections as "frustrating their expectations." Corporations have already used such foreign investor privileges under existing U.S. FTAs to attack 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 that the TPP would expand.  Provisions, such as those in the May 10 deal, that call for countries to enforce their environmental laws sound hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement. 

December 19, 2014

Congressional Leaders Reject Wall Street’s Push for Deregulatory “Trade” Pacts

The Obama administration needs to stop negotiating so-called “trade” deals with deregulatory rules pushed by the likes of Citigroup that would undermine the re-regulation of Wall Street. 

That’s the message that Senator Elizabeth Warren – champion of financial reform and member of the Senate Banking Committee, Congresswoman Maxine Waters – Ranking Member of the House Financial Services Committee, and other congressional leaders have delivered to the administration in recent letters.  

The members of Congress warn against expanding the deregulatory strictures of pre-financial-crisis trade pacts, crafted in the 1990s under the advisement of Wall Street firms, via two pacts currently under negotiation: the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA, also known as TTIP). 

As proposed, both pacts would include controversial foreign investor privileges that would empower some of the world’s largest banks to demand U.S. taxpayer money for having to comply with U.S. financial stability policies.  

Yesterday, Sen. Warren and Sens. Tammy Baldwin and Edward Markey sent U.S. Trade Representative Michael Froman a letter calling for such “investor-state dispute settlement” (ISDS) provisions, which have sparked global controversy, to be excluded from the TPP.  The letter states:

Including such provisions in the TPP could expose American taxpayers to billions of dollars in losses and dissuade the government from establishing or enforcing financial rules that impact foreign banks. The consequence would be to strip our regulators of the tools they need to prevent the next crisis.

Earlier this month, Rep. Waters and Reps. Lacy Clay, Keith Ellison, and Raúl Grijalva sent a similar letter to Froman that called for ISDS to be excluded from TAFTA to safeguard financial stability, stating:

Private foreign investors should not be empowered to circumvent U.S. courts, go before extrajudicial tribunals and demand compensation from U.S. taxpayers because they do not like U.S. domestic financial regulatory policies with which all firms operating here must comply. 

TPP and TAFTA negotiators are also contemplating pre-crisis rules that would threaten commonsense prudential regulations such as restrictions on derivatives and other risky financial products, measures to keep banks from becoming “too big to fail,” firewalls to protect our savings accounts from hedge-fund-style bets, capital controls to prevent financial crises, and a Wall Street tax to counter speculative and destabilizing bubbles.  

Senators Warren, Baldwin, and Markey made clear in their letter that such anachronistic rules must not be inserted into a binding pact:

To protect consumers and to address sources of systemic financial risk, Congress must maintain the flexibility to impose restrictions on harmful financial products and on the conduct or structure of financial firms. We would oppose including provisions in the TPP that would limit that flexibility.

So did Representatives Waters, Clay, Ellison, and Grijalva:

TTIP should also not replicate rules from past trade agreements that restrict the use of capital controls, which the International Monetary Fund and leading economists have endorsed as legitimate policy tools for preventing and mitigating financial crises. Nor should TTIP include provisions that could limit Congress’ prerogative to enact a financial transaction tax to curb speculation while generating revenue.

Similar warnings were recently issued by more than 50 of the largest civil society organizations concerned with financial stability on both sides of the Atlantic – including Americans for Financial Reform, which itself represents 250 organizations.  In a letter to Froman and other TAFTA negotiators in October, the groups wrote:

We believe it is highly inappropriate to include terms implicating financial regulation in an industry-dominated, non-transparent “trade” negotiation. Financial regulations do not belong in a framework that targets regulations as potential “barriers to trade.” Such a framework could chill or roll back post-crisis efforts to re-regulate finance on both sides of the Atlantic whereas further regulation of the sector is much needed.

While governments across the world strive to rein in risk-taking by the financial firms that brought us the worst economic crisis since the Great Depression, U.S. trade negotiators (advised by many of those same firms) appear to be moving in the opposite direction.  We cannot afford to insert into binding “trade” pacts more deregulatory constraints pushed by Wall Street.  We cannot afford the TPP or TAFTA. 

The recent letter from civil society organizations made this clear:

We are only now implementing the lessons of the last financial crisis. Let us not lay the groundwork for the next one.

December 16, 2014

Should the World’s Largest Chemical Corporations Be Allowed to Attack States’ Chemical Safety Protections?

Patrick Gleeson, Trade and Policy Researcher of Global Trade Watch  

How would you feel about the U.S. government paying foreign corporations to keep cancer-causing chemicals out of your water bottles?

That is a risk we’d face under a sweeping U.S.-EU “trade” deal under negotiation – the Trans-Atlantic Free Trade Agreement (TAFTA), also known as TTIP.  As proposed, TAFTA would empower thousands of European firms – including chemical giants like BASF, Bayer, and Royal Dutch Shell – to bypass U.S. courts, go before extrajudicial tribunals and demand taxpayer compensation for U.S. policies – including chemical regulations.  

We depend on such regulations every day to keep toxic chemicals out of our food, toys, rivers, and clothes.  This past July, more than 100 organizations on both sides of the Atlantic sent a letter to TAFTA negotiators to warn against TAFTA’s threats to such commonsense protections:

Stricter controls (including restrictions on some or all uses) of hazardous chemicals – including carcinogens and hormone disrupting chemicals – are vital to protecting public health…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.

While U.S. federal chemical regulations are sorely outdated – with no major overhaul since the 1976 Toxic Substances Control Act (TSCA) – U.S. states have been filling in the gap, enacting forward-looking policies to protect us from chemicals that pose a threat to human health and the environment.  State chemical safety policies cover everything from mandatory disclosure of chemical compounds on the packaging of consumer goods to outright bans on specific chemical compounds and additives.  According to Safer States, 35 U.S. states have enacted 169 chemical safety policies, while 114 more such policies are pending in 29 states.  

But this web of state-level protections on which most U.S. consumers depend could come under attack if TAFTA were to expand the controversial system known as investor-state dispute settlement (ISDS).  Six of the world’s 15 largest chemical firms are based in EU countries. The largest among them have facilities in many of the U.S. states that are currently contemplating new chemical restrictions.

Using TAFTA’s ISDS provisions, these foreign firms would be empowered to challenge U.S. state-level chemical protections with which U.S. firms must comply.  They could do so on the basis of sweeping rights available only to foreign investors, alleging, for example, that new chemical restrictions violated their rights by frustrating their expectations.  Such cases would be decided by tribunals unaccountable to any electorate, composed of three private lawyers authorized to order U.S. taxpayer compensation for “expected future profits” that the corporations claim they would have earned if not for the challenged chemical safety policies.

Recognizing the threat that ISDS poses to the autonomy of U.S. states to regulate in the public interest, the National Conference of State Legislatures (NCSL), a bipartisan association representing state legislatures, has repeatedly stated it will oppose any deal that includes ISDS.

“The unpopular proposal to include ISDS in TTIP 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,” stated the July 2014 letter from more than 100 organizations.

To launch ISDS attacks against U.S. states’ chemical safety measures under TAFTA, European chemical firms would just need to have an investment in the United States – a broad criterion that many of the largest firms easily fulfil.  

BASF, the world’s largest chemical company, is based in Germany but has 66 subsidiaries in the United States.  BASF has particularly large facilities in 20 states, including Arkansas, Colorado, Connecticut, Delaware, Florida, Kentucky, Louisiana, Michigan, New Jersey, New York, North Carolina, Pennsylvania, Tennessee, and South Carolina.  Each of these states has considered new chemical safety legislation this year, the likes of which BASF would be empowered to challenge before extrajudicial tribunals under TAFTA. 

As a major supplier of chemicals to the U.S. market, BASF has already actively lobbied the U.S. Congress specifically to halt proposed restrictions on chemicals that it manufactures.  In 2014 alone, BASF has spent $2.3 million to lobby Congress on chemicals-related policies. TAFTA would give BASF a new tool to chill the development of U.S. chemical safety measures.

Other European chemical corporations have facilities scattered throughout the United States, manufacturing products ranging from synthetic fibers to rubber chemicals to pesticides.  Bayer, based in Germany, has subsidiaries in nine U.S. states, seven of which have been considering pending chemical safety legislation this year.  Royal Dutch Shell, headquartered in the Netherlands, has a U.S.-based chemical division that claims to make “approximately 20 billion pounds of chemicals annually, which are sold primarily to industrial markets in the United States.”  Shell’s U.S. chemicals division has facilities in Louisiana, which has been enacting new chemical safety measures. Were such new state-level regulations to be imposed on these corporations’ products out of concern for chemical safety, they would be empowered under TAFTA to demand taxpayer compensation.

Fifteen states, for example, are currently considering legislation related to a notorious chemical called bisphenol A, or BPA.  BPA has been identified as an endocrine disruptor, a class of chemicals that, according to the National Institutes of Health, “may interfere with the body’s endocrine system and produce adverse developmental, reproductive, neurological, and immune effects in both humans and wildlife.” BPA is used extensively as a plastics coating and hardener in food and beverage containers, including water bottles and the lining of metal cans. BPA can seep into the foods and beverages it contains, leading to human consumption.  

Though usage of BPA in baby bottles, pacifiers, and other baby products was phased out in recent years due to broad consumer concerns and government reports of potentially harmful impacts on infants’ development, BPA is still widely used in other consumer products.  Recent studies have continued to indicate health concerns for adults, including a 2014 Duke Medicine study finding that BPA stimulates the growth of breast cancer cells and lowers the efficacy of cancer treatments.  Another study this year, from the University of Cincinnati, finds a link between BPA levels in men and prostate cancer.

According to the NCSL, 12 states and the District of Columbia have enacted BPA restrictions thus far, including, for example, bans on BPA in reusable food containers and thermoses. With 15 states considering additional BPA-related protections just this year, we are likely to see more states enact policies to limit consumers’ exposure to this toxin.  

The risk is real that such policies could become the target of ISDS attacks by European chemical firms under TAFTA.  Some of these firms, including ones with investments in the United States, have already been lobbying against BPA restrictions in Europe for years.  Bayer is even a member of an industry alliance known as the BPA Coalition, dedicated to convincing the public and policymakers “that the safe use of BPA poses no known health risk to people.”

Might such firms be interested in using TAFTA to demand U.S. taxpayer compensation for new efforts to keep our water bottles free of carcinogens?  Let’s not find out.  

November 11, 2014

Defending Foreign Corporations' Privileges Is Hard, Especially When Looking At The Facts

Forbes just published this response from Lori Wallach and Ben Beachy (GTW director and research director) to a counterfactual Forbes opinion piece by John Brinkley in support of investor-state dispute settlement.  

Forbes-logoDefending Foreign Corporations' Privileges Is Hard, Especially When Looking At The Facts

By Lori Wallach & Ben Beachy

 

Even those who support the controversial idea of a parallel legal system for foreign corporations, known as investor-state dispute settlement or ISDS, likely cringed at John Brinkley’s recent attempt to defend that system. (“Trade Dispute Settlement: Much Ado About Nothing,” October 16.)

In trying to justify trade agreement provisions that provide special rights and privileges to foreign firms to the disadvantage of their domestic competitors, Brinkley wrote 24 sentences with factual assertions. Seventeen of them were factually wrong.

To his credit, it is no easy task to defend a system that empowers foreign corporations to bypass domestic courts and laws to demand taxpayer compensation for domestic policies that apply equally to their local competitors, but that they claim frustrate special privileges granted to them as foreign investors. The cases are heard by extrajudicial tribunals not bound by precedent. Decisions are not subject to substantive appeal.

Brinkley’s mission was particularly difficult given how unpopular the ISDS system has become. Indeed, one reason that the CATO Institute has come out against ISDS is the realistic concern that its inclusion in the proposed trans-Pacific and transatlantic free trade pacts could derail those negotiations.

ISDS is risky to include in a transatlantic deal

In Europe, the incoming European Commission President and the Economic Minister of Germany have both indicated that they oppose including ISDS in the U.S.-EU deal. Whether one focuses on the threat to solvency or fair competition, it’s especially risky to include ISDS in a transatlantic deal. Doing so would newly empower more than 70,000 U.S. and EU subsidiaries of cross-registered firms to demand compensation based on special foreign investor privileges—an unprecedented increase in liability for both the United States and the EU.

Around the world, governments from Australia to South Africa have started to rebuke ISDS as studies have shown countries have failed to attract more FDI by enacting ISDS agreements, while governments—and their treasuries—have come under increasing ISDS attacks by foreign firms.

Only 50 cases were launched in the first three decades of ISDS pacts. But in each of the past three years more than 50 cases have been filed annually. The current stock of 568 ISDS cases includes demands for compensation over land use policies, tobacco controls, energy and financial regulations, pollution cleanup requirements, patent standards and other policies that apply equally to domestic firms, and that often have been approved by domestic high courts.

This trend and its threat to the rule of law have led esteemed jurists from free-trade-minded nations such as Singapore, New Zealand and Australia to join the U.S. National Conference of State Legislatures (which represents our states’ majority GOP-controlled legislatures) in opposing ISDS.

Reviewing the facts

In his quixotic effort to defend the ISDS system, Brinkley made a real mess of the facts. There’s not space to go through all 17 factual errors, but it’s important to correct his biggest blunders.

For instance, Brinkley argued, “What matters is not whether [the foreign corporations] can sue, but whether they can win.” He then proceeded to misstate the win record.

In fact, the United Nations figures on ISDS case outcomes, which Brinkley cited, show that foreign corporations have gained favorable rulings or settlements in 57 percent of the ISDS cases launched to date.

Foreign corporations have “won” against Canada’s ban on hazardous waste exports, the Czech Republic’s decision to not bail out a bank, a Mexican municipality’s decision to not allow the expansion of a contaminated toxic waste facility, and a Canadian requirement for any and all firms obtaining oil concessions to contribute to research and development in the affected province.

Foreign firms and the success of their ISDS cases

Foreign firms have also proven successful in using the threat of an ISDS case to extract favorable settlements, which often oblige governments to pay large sums to the foreign firms. A government paid $900 million to a firm in one recent ISDS settlement.

ISDS settlements have also led governments to alter policies challenged by foreign corporations. An ISDS case that a U.S. chemical company launched against Canada’s ban on a toxic gasoline additive – one currently also banned in the United States – resulted in Canada overturning the ban. In another ISDS settlement, the German city of Hamburg was obliged to roll back environmental requirements on a Swedish corporation’s coal-fired power plant.

Without explanation, Brinkley chose simply to ignore all of the ISDS cases that were settled in favor of the foreign firm, distorting his “scoreboard” of ISDS case outcomes. And he did not mention that even when governments “win,” they are still on the hook for high legal costs and tribunal fees associated with defending these cases – an average of $8 million per case.

Investor-state disputes vs. state-state disputes

Brinkley’s accounting became even more confused when he conflated investor-state disputes withstate-state disputes – and similarly made a mish-mash of our critique. Brinkley appears not to realize the difference between the ISDS system, in which any covered foreign corporation claiming to have an investment in a country can drag a government to an extrajudicial tribunal to challenge its policies, and trade agreement dispute settlement in which cases may only be brought by government signatories to pacts.

He stated, for example, that “the aggrieved foreign investor can turn to a dispute settlement body at the…WTO [World Trade Organization].” False. The WTO only allows governments – not foreign corporations – to bring cases against governments.

Brinkley then picked one state-state dispute that the United States lost at the WTO and wondered why the UN did not include it in its list of investor-state cases against the United States. He added the lost WTO state-state case to his tally of investor-statechallenges that the United States has faced to date, and summarized his hodgepodge U.S. win-loss record as, “we’ll say 13-1.”

Brinkley seems unaware that in fact the United States has lost 61 out of 67state-state cases brought against it at the WTO – a 91 percent loss rate.

As for investor-state cases brought against the United States, few such cases exist thanks to the reality that 52 of the 54 countries with which the United States has an ISDS-enforced pact are not major FDI exporters. Brinkley appears strangely unconcerned that the U.S. government plans to dramatically expand its investor-state liability under the U.S.-EU deal, which would open the door to foreign investor claims from 11 of the world’s 20 largest FDI exporters.

The Loewen fluke

Brinkley also cited an ISDS case that Loewen, a Canadian funeral home conglomerate, launched against the U.S. government over Mississippi’s jury trial system and the standard common-law requirement to post bond before pursuing an appeal. (Loewen had lost a state court case battle against a rival funeral home operator.)

Brinkley argued that because the tribunal dismissed Loewen’s ISDS claim, there is no cause for concern. But the tribunal actually supported a number of Loewen’s claims on the merits. It only dismissed the case without imposing a penalty on the U.S. government thanks to a remarkable fluke: Loewen’s lawyers reincorporated the firm as a U.S. company, thus destroying its ability to obtain compensation as a “foreign” investor.

Such luck should not be expected to continue, particularly if, under the U.S.-EU deal, foreign investor privileges are granted to thousands of European firms operating here.

Before we subject our national treasury, our domestic firms or our laws to an unprecedented expansion of ISDS liability, we should take a cold, hard look at the legacy to date of this extraordinary system. It would help to start with actual facts.

Ms. Wallach and Mr. Beachy are the director and research director, respectively, of Public Citizen’s Global Trade Watch.

October 07, 2014

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

October 02, 2014

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

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

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

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

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

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

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

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

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

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

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

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

Read the report.

August 21, 2014

TPP: The “Trade” Deal that Could Inflate Your Healthcare Bill

Much has been said about how the Trans-Pacific Partnership (TPP) threatens to raise medicine prices in TPP developing countries, thanks to the deal's proposed expansion of monopoly protections for pharmaceutical corporations.  

Less has been said about the proposed TPP rules that could increase medicine prices in the United States.  

Americans pay far more for healthcare than people in any other developed country, even though U.S. life expectancy falls below the average for developed countries. A major contributor to our bloated healthcare costs is the high prices for medicines in the United States. According to the Government Accountability Office, U.S. drug prices increased more than 70 percent faster than prices for other healthcare goods and services over 2006-2010. As a result, millions of Americans cannot afford the medicines they need to live healthy lives.

Soaring drug prices also drive up the amount that taxpayers must pay to fund public health programs such as Medicare, Medicaid and programs covering the U.S. military and veterans. Indeed, rising healthcare costs are the number one contributor to the U.S. government’s projected long-term budget deficits.

To try to combat the twin problems of unaffordable healthcare and unsustainable deficits, U.S. federal and state governments already use several tools to tamp down the cost of drugs – for Medicare, Medicaid and for military healthcare under TRICARE and the Department of Veterans Affairs (VA). Many more such cost containment policies have been proposed.

Yet, the TPP threatens to chill such proposals and even roll back existing policies to rein in exorbitant medicine prices. Leaked draft TPP texts – an intellectual property chapter, investment chapter and healthcare annex – contain expansive rules that would constrain the ability of the U.S. government to reduce medicine prices. Getting these terms into the TPP was a key objective of large U.S. pharmaceutical corporations that stand to reap monopoly profits from expansive patent terms and restrictions on government cost containment efforts. This incentive may explain why pharmaceutical corporations have lobbied Congress for the TPP more than any other industry.

The TPP’s threats to the affordability of U.S. healthcare have spurred major groups that have not traditionally taken part in trade policy debates to warn against the TPP’s provisions. For example, AARP – representing more than 37 million Americans over the age of 50 – joined unions and consumer groups in a November 2013 letter to President Obama to express “deep concern” that texts proposed for the TPP would “limit[] the ability of states and the federal government to moderate escalating prescription drug, biologic drug and medical device costs in public programs.” The groups concluded that the TPP could “undermine[] access to affordable health care for millions in the United States and around the world.”

Stay tuned for post #2 on specific TPP threats to affordable U.S. healthcare: Expansive Rights for Big Pharma, Expensive Medicines for Consumers.

July 09, 2014

Proposed U.S.-China Treaty Would Expose U.S. Laws to Extrajudicial Attacks by Chinese Corporations, Incentivize More U.S. Job Offshoring

Chinese Acquisitions, Establishment of U.S. Subsidiaries Growing at 80 Percent Annual Rate with 820 Major Deals Totaling More Than $37 Billion Since 2000

At a time of rapid growth in Chinese acquisition of U.S. firms, establishing the U.S.-China Bilateral Investment Treaty (BIT) discussed during this week’s U.S.-China Strategic and Economic Dialogue is an especially terrible idea, said Public Citizen.

The treaty’s investor-state dispute settlement provisions (ISDS) would empower Chinese corporations invested here to directly challenge U.S. public interest safeguards before extra-judicial tribunals that could order payment of U.S. Treasury dollars to compensate the firms for U.S. laws that they claim violate their new treaty rights.

Over the past five years, there has been a surge in Chinese corporations acquiring or creating U.S.-based subsidiaries, with such deals growing at an annual rate of 80 percent. Since 2000, Chinese corporations have acquired or installed about 820 U.S.-based firms in deals totaling more than $37 billion. Nearly 90 percent of these deals, by value, were Chinese takeovers of existing U.S. companies. Not included in these numbers are many instances of Chinese firms purchasing controlling shares of U.S. companies’ stock.

“How could it be in our interest to empower the ever-greater number of Chinese firms operating here – many owned by the Chinese government – to circumvent U.S. courts and challenge our financial, environmental, health and other public interest policies before foreign tribunals empowered to order payment of our tax dollars to these Chinese firms?” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “A U.S.-China BIT would invite a wave of attacks on our domestic laws by Chinese corporations through a system of private foreign tribunals that are a threat to our sovereignty and solvency.”

By providing new special protections and rights for U.S. firms that relocate to China, the treaty would remove many of the costs and risks of relocating and incentivize another wave of American job offshoring to China.

Under a U.S.-China BIT’s investor state dispute settlement provisions, Chinese corporations with U.S.-based operations and firms with significant Chinese investment would be empowered to drag the U.S. government before extrajudicial tribunals and demand taxpayer compensation for a broad array of non-trade-related policies. These tribunals, composed of three private attorneys, would be authorized to order unlimited U.S. taxpayer compensation for alleged losses to the Chinese firms’ “expected future profits” on the basis of claims that U.S. policies violated the firms’ sweeping, BIT-granted foreign investor “rights” not available to U.S. firms.

For example, thanks to its purchase last year of Virginia-based Smithfield Foods, the largest pork producer in the world, the Chinese corporation Shuanghui International could take advantage of a U.S.-China BIT’s investor privileges to challenge new U.S. food safety standards before a foreign tribunal. And Sinopec, a Chinese corporation that acquired a 50 percent stake in 850,000 acres of oil and natural gas leases owned by Chesapeake Energy last year, could use a U.S.-China BIT to skirt U.S. domestic courts and directly challenge future climate or fracking regulations.

Corporations directly controlled by the Chinese government have been responsible for about half of the Chinese acquisitions and other investments in U.S.-based firms to date. Experts have testified before Congress that expanded Chinese control of U.S.-based companies is guided not only by market forces, but also by Chinese government strategy. Under a U.S.-China BIT, the Chinese government would be able to use state-owned enterprises doing business in the United States to directly challenge U.S. domestic laws on the basis of substantive investor “rights” that are even more expansive, and more threatening to domestic regulations, than those found at the World Trade Organization. 

May 30, 2014

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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 20, 2013

Corporate Tribunals: A U.S. / EU Holiday Gift to Foreign Firms?

A moratorium on fracking. A strong anti-smoking cigarette label. A requirement to clean up industrial pollution. A medicine patent policy that could tamp down health costs. A decision to phase out nuclear energy. 

Each of these has been attacked by a foreign corporation using "trade" and investment treaties that allow firms to circumvent domestic legal systems and directly challenge domestic public interest policies before private international tribunals.  Such tribunals, comprised of three lawyers, are currently deciding whether to order governments to hand foreign corporations taxpayer money for each of the health and environmental safeguards above. 

The extraordinary system that enables such assaults on domestic policymaking, known as the investor-state regime, could be vastly expanded by a "trade" deal under negotiation this week between the U.S. and the European Union.  A "trade" deal only in name, the Trans-Atlantic Free Trade Agreement (TAFTA) would empower an unprecedented number of foreign corporations to attack health, environmental, financial, product safety, labor, Internet and other domestic policies in both the U.S. and the EU. Here's a synopsis of what's at stake. 

Empowering Foreign Corporations to Directly Attack Public Protections

U.S. and EU officials have called for TAFTA to grant foreign firms the power to directly attack domestic health, financial, environmental and other public interest policies that they view as undermining new foreign investor privileges and rights that TAFTA would establish. TAFTA could empower individual foreign corporations to drag the U.S. and EU governments before extrajudicial tribunals, comprised of three private attorneys, that would be authorized to order unlimited taxpayer compensation for domestic policies or government actions perceived as undermining firms’ “expected future profits.”  

This extreme “investor-state” system already has been included in U.S. “free trade” agreements, forcing taxpayers to pay firms more than $400 million for toxics bans, land-use rules, regulatory permits, and water and timber policies. 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.

TAFTA could vastly expand the investor-state threat, given the thousands of corporations doing business in both the United States and EU that would be newly empowered to attack standards and safeguards. More than 3,300 EU parent corporations own more than 24,200 subsidiaries in the United States, any one of which could provide the basis for an investor-state claim. This exposure to investor-state attacks far exceeds that associated with all other U.S. “free trade” agreement partners. Similarly, the EU could be exposed to a potential wave of investor-state cases from any of the more than 14,400 U.S.-based corporations that own more than 50,800 subsidiaries in the EU. In sum, TAFTA could newly enable corporate attacks on behalf of any of the U.S. and EU’s 75,000 cross-registered firms.

The EU is proposing for TAFTA an even more radical version of investor privileges than that found in past U.S. pacts. But even if TAFTA would simply replicate the sweeping terms of past agreements, thousands of corporations would gain a new tool to undermine the policies on which we all rely. Consider these extreme features:

Continue reading "Corporate Tribunals: A U.S. / EU Holiday Gift to Foreign Firms?" »

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?" »

October 16, 2013

Corporations Now Using Foreign Tribunals to Attack Domestic Court Rulings

Should an international tribunal of three private attorneys, sitting outside of any domestic legal system, have the power to overrule domestic courts? 

That’s the question addressed in the recent analysis, “Investment Agreements versus the Rule of Law?,” published on UNCTAD’s Investment Policy Hub by Todd Tucker, Gates Scholar at the University of Cambridge’s Centre of Development Studies.  The piece highlights the little-known but creeping practice of corporations asking foreign tribunals to second-guess domestic court decisions not in their favor and to order taxpayer payment as compensation. 

These tribunals are the product of the “investor-state” system, a little-known creation of “trade” and investment deals that empowers foreign corporations to skirt domestic courts and directly challenge governments before extrajudicial tribunals for policies and decisions that they claim as undermining “future expected profits.”  Under this extreme system, foreign corporations have challenged toxics bans, land-use rules, regulatory permits, water and timber policies, medicine patent policies, pollution clean ups, climate and energy laws, and other public interest polices. 

As if undermining a government’s public interest laws and regulations was not enough, foreign investors are increasingly using the investor-state system to challenge court judgments, undermining the principles of legal certainty, state sovereignty, and rule of law more generally.  While domestic courts often employ safeguards, such as the principle of judicial review, judicial independence and transparency in their decision-making, these safeguards are notably absent in investor-state arbitrations, where lawyers who represent the investors take turns as ostensibly “impartial” arbitrators, interpretations of international law are regularly inconsistent and erroneous, and decisions often cannot be appealed.

In his compelling piece, Mr. Tucker cites examples from three investor-state case decisions issued in the last several years, Mr. Franck Charles Arif v. Republic of Moldova and two iterations of Chevron v. Ecuador, in which the tribunals found Moldova’s and Ecuador’s domestic court decisions to be in violation of these countries’ obligations to foreign investors under Bilateral Investment Treaties (BITs).

In the Moldovan case, Moldovan airport officials gave Franck Arif, a French national, an exclusive concession to operate tax-free shops at an airport.  When his competitors challenged this in court, Moldovan courts found that the non-competitive concession was illegal.  In response, Franck Arif launched an investor-state case against Moldova under the France-Moldova BIT, arguing that the courts’ ruling violated the “fair and equitable treatment” provision in the BIT – the vague obligation that inventive tribunals have interpreted as corporations’ “right” to a legal framework that conforms to their “expectations.” The tribunal first conceded that the Moldovan courts had “…applied Moldovan law legitimately and in good faith in the proceedings commenced by Claimant’s competitors.” Nevertheless, the tribunal still decided that the Moldovan courts’ rulings conflicted with the airport officials’ granting of the non-competitive concession, and therefore constituted a violation of the vague “fair and equitable treatment” obligation as a “breach” of Mr. Arif’s “expectations.”

In one of the Chevron v. Ecuador cases, a three-person tribunal last year ordered Ecuador’s government to interfere in the operations of its independent court system on behalf of Chevron by suspending enforcement of a historic $18 billion judgment against the oil corporation for mass contamination of the Amazonian rain forest.  The ruling against Chevron, rendered by Ecuador’s courts, was the result of 18 years of litigation in both the U.S. and Ecuadorian legal systems.  Ecuador had explained to the panel that compliance with any order to suspend enforcement of the ruling would violate the separation of powers enshrined in the country’s Constitution – as in the United States, Ecuador’s executive branch is constitutionally prohibited from interfering with the independent judiciary.  Undeterred, the tribunal proceeded to order Ecuador “to take all measures at its disposal to suspend or cause to be suspended the enforcement or recognition within and without Ecuador of any judgment [against Chevron].”

This dangerous trend of private three-person tribunals assuming the authority to contravene domestic court decisions at the behest of multinational corporations should raise the ire of those who support the independence of courts, the sovereignty of nations, the rule of law, or even the core democratic notion that a system of legal decision-making should be accountable to those who will live with the decisions.  Now the Trans-Atlantic Free Trade Agreement (TAFTA) and the Trans-Pacific Partnership (TPP) threaten to expand the investor-state system across two oceans, subjecting domestic court decisions to a new wave of second-guessing by unaccountable tribunals.  Now is the time to halt the advance of this extreme system – to restore the authority of our courts and the principles of our democracy.  

August 23, 2013

Bloomberg, Health Experts Denounce Obama's Gift to Big Tobacco in the TPP

The Obama administration has drawn sharp criticism from leading health organizations, U.S. state representatives, and New York mayor Michael Bloomberg by caving to pressure from Big Tobacco to abandon safeguards for tobacco control policies in the Trans-Pacific Partnership (TPP), the pending "free trade" deal with 11 Pacific Rim countries. The administration has scrapped a proposal to provide a "safe harbor" for tobacco control measures.

Instead the administration will issue a proposal in the current Brunei round of TPP negotiations that clears a path for tobacco corporations to use the TPP to directly challenge governments' progressive public health measures.  

In response to the announcement, a major victory in tobacco corporations' effort to use TPP-like deals to roll back anti-smoking safeguards, Dr. Gregory Connolly of the Harvard School of Public Health stated, "Our government’s trade policy is promoting the tobacco epidemic." 

6a00d83452507269e2019104ee149f970c-320wiThe American Cancer Society, the American Heart Association, the American Lung Association, and the Campaign for Tobacco Free Kids denounced the Obama administration’s decision to cave to Big Tobacco's TPP demands at the expense of public health. Legal and health experts at the Harvard School of Public Health, Georgetown University Law Center, and Action on Smoking and Health blasted the TPP proposal, finding it "will do little to protect governments’ right to regulate tobacco." The state of Maine's Citizen Trade Policy Commission concluded, "it would be better to not offer this text at all than to give the false impression that the United States is serious about protecting government authority within the TPP to regulate tobacco to protect health.

Articles spotlighting the administration’s TPP backtracking have appeared in many prominent news sources, including the Washington Post, Bloomberg, the Wall Street Journal, and Reuters.

New York City mayor Michael Bloomberg also weighed in on the TPP controversy by releasing a scathing op-ed in yesterday’s New York Times. Bloomberg noted that not only would the U.S. proposal restrict tobacco control measures and significantly decrease the price of cigarettes, but also expose TPP governments to direct "investor-state" challenges launched by tobacco corporations against public health laws:

If the Obama administration’s policy reversal is allowed to stand, not only will cigarettes  be cheaper for the 800 million people in the countries affected by the trade pact, but multinational tobacco corporations will be able to challenge those governments — including America’s — for implementing lifesaving public health policies. This would not only put our tobacco-control regulations in peril, but also create a chilling effect that would prevent further action, which is desperately needed.

He's right. The TPP's extreme investor privileges would empower tobacco corporations to skirt domestic legal systems and attack tobacco control policies before extrajudicial tribunals as a means of intimidating policymakers who would dare to enact such safeguards. The Obama administration's proposal does nothing to limit, or even to address, this empowerment of Big Tobacco.

Unfortunately, the investor-state threat is not a hypothetical one. Phillip Morris has already used such investor privileges in other treaties to attack landmark anti-smoking laws in Australia and Uruguay after failing to undermine those health laws in domestic courts.  As Andrew Martin points out in Bloomberg, Philip Morris has been leading Big Tobacco's battle to pressure the Obama administration to weaken tobacco-control safeguards in the TPP.

The Obama administration's caving to that pressure makes clear the TPP's very real threat to public health.  As Laurent Huber of Action on Smoking and Health stated, the new tobacco-friendly proposal for TPP "will mean more lives lost, both here in the US and abroad.” It is more crucial than ever to expose the TPP and to stop it from being fast tracked through Congress. Our health depends on it. 

July 01, 2013

Will the Trans-Atlantic Spying Scandal Kill the Trans-Atlantic "Trade" Scandal?

The newest Snowden-facilitated leak – that the U.S. National Security Agency (NSA) has been spying on European governments – is the latest hurdle to appear in the steeplechase-resembling race to launch negotiations for the Trans-Atlantic Free Trade Agreement (TAFTA)

The revelation has sparked ire from European officials, unleashing a torrent of warnings today that TAFTA negotiations, slated to start next week, may be doomed before they begin. 

Amid reports that the NSA bugged the offices and infiltrated the hard drives of EU government officials, EU officials have made clear that they are not in the mood to trust U.S. trade negotiators.  Yesterday the EU Commissioner of Justice stated, “We cannot negotiate over a big trans-Atlantic market if there is the slightest doubt that our partners are carrying out spying activities on the offices of our negotiators.”  At this point, that doubt seems more than slight. 

But EU nations aren’t the only ones in the crosshairs of the NSA’s Cold-War-style espionage ambitions.  The Guardian revealed yesterday that Mexico and Japan, members of the similarly-sweeping Trans-Pacific Partnership (TPP) “trade” pact, appear on a list of 38 foreign embassies and missions that the NSA lists as spying “targets.”  (It kind of belies the moniker of “partnership” when you spy on your “partners.”)  The revelation could bring the sort of rift with TPP countries that we are now seeing with TAFTA countries. 

For TAFTA, that rift didn’t begin with the most recent NSA spying scandal.  U.S. and European corporations have explicitly called for the deal to be used as a way to water down critical safeguards, prompting waves of criticism from consumer, environmental, health, farmer, labor, and tech groups on both sides of the Atlantic. 

The National Corn Growers Association, which recently went to bat for Monsanto in a Supreme Court case pitting the genetically-modified-organism (GMO) giant against an Indiana farmer, asked that TAFTA be used to “end the moratorium” on GMOs in Europe.  That already contentious proposition became all the more so when non-approved strains of GMO wheat were found in Oregon one month ago. 

Meanwhile, corporations the likes of Verizon have called for such deals to be used to ensure that privacy policies do not limit the “seamless” flow of personal data across borders – a particularly taboo request in the wake of revelations that Verizon has been handing to the NSA the private phone data of anyone carrying a Verizon phone.

Even more incredible, corporations the likes of Chevron have asked that TAFTA grant foreign corporations the power to directly challenge sovereign governments over environmental and health policies in tribunals that operate completely outside any domestic legal system.  The EU negotiating mandate for TAFTA has granted this request, incorporating the extreme “investor-state” enforcement mechanism.  That incredible provision alone generated over 10,000 ire-filled comments from U.S. citizens within 32 hours in response to a single email from Rep. Grayson in May. 

Such controversial components of the deal have generated a crescendo of controversy surrounding TAFTA.  Ironically, the NSA has now added to the cacophony of opposition.   Corporate America cannot be pleased.  The NSA’s overreaching national security agenda has jeopardized their overreaching corporate agenda to use TAFTA to roll back financial, climate and food safety standards that make doing business less convenient.  If the two agendas would cancel each other out, perhaps we could get on with an agenda that’s actually supported by the public – from environmental stability to public health to personal privacy. 

June 14, 2013

New Report: How the U.S.-EU Trade Deal would Grant Sweeping Corporate Privileges

The Trans-Atlantic Free Trade Agreement (TAFTA) is in trouble.  Report after report has indicated that the massive U.S.-EU deal is on shaky ground now that the NSA spying scandal has fueled European privacy concerns and botched the hopes of U.S. telecommunications firms to use the deal to downsize data privacy protections. The discovery of an unapproved strain of genetically-modified wheat in Oregon has also thrown water on plans for the deal, stoking European resistance to U.S. agribusiness's calls for TAFTA to be used to dismantle Europe's GMO labeling policies.  And France's refusal to accept Hollywood's demands to fill French TV with U.S. movies has only further crippled prospects for the deal.  

But there's another polemical component of TAFTA that could prove just as critical in contributing to the deal's unraveling: the extreme corporate privileges of the "investor-state" system slated for inclusion in the pact.  About 10,000 people in the U.S. lambasted this extreme provision within 32 hours last month, spurred by a single email, in comments to the Obama administration on TAFTA.  

The incredible inclusion of the investor-state disptue settlement regime in TAFTA was first revealed when the German blog Netzpolitik leaked the EU Council’s mandate to the European Commission to negotiate the deal. This extreme system empowers corporations to circumvent domestic court systems and directly challenge a government’s public interest laws before a three-person, extrajudicial tribunal if the corporations feel the laws affect their ability to make a profit.  Corporations have already used the system to attack a slew of environmental and health policies, resulting in tribunal orders for taxpayers to pay more than $3.5 billion to foreign corporations under U.S. trade and investment deals alone.

6a00d83452507269e201901d08a3c8970b-800wiCorporate Europe Observatory and the Transnational Institute have teamed up to publish a joint report taking a closer look at how the inclusion of investor privileges in the agreement would grant exorbitant rights to corporations and threaten crucial public interest laws in both the U.S. and the EU.

The report outlines the lobbying efforts of corporations advocating for the inclusion of investor privileges in the agreement. The U.S. Chamber of Commerce said in a statement to USTR that the investment chapter of the U.S.–EU trade pact should serve as "the 'gold standard’ for other investment agreements.” Chevron has requested that TAFTA require governments to fulfill foreign investors' "expectations" and that such investor privileges cover “both existing and future investments."  Chevron is intimately familiar with the investor-state system, having launched an investor-state case against Ecuador to avoid paying the $18 billion that Ecuadorian courts have ordered the company to hand over to clean up its mass-contamination of the Amazonian rainforest. 

Corporations in the U.S. and EU are already the most frequent (ab)users of the investor-state system, having launched cases under existing "trade" and investment deals to challenge important domestic regulations such as green energy and medicines policies, bans on harmful chemicals, and environmental restrictions on mining, among others.

The sheer number of cross-investing corporations in the EU and U.S. increases the risk of investor-state disputes if TAFTA (also known as TTIP) would take effect.  According to the report : 

“The tremendous volume of transatlantic investment – both partners make up for more than half of foreign direct investment in each others' economies – hints at the sheer scale of the risk of such litigation wars. Additionally, thousands of EU and US companies have affiliates across the Atlantic; under TTIP they could make investor-state claims via these affiliates in order to compel their own governments to refrain from regulations they dislike.”

The inclusion of the investor-state system in this proposed U.S.-EU deal is even more incredible considering the ostensible premise for the extreme regime.  The stated justification for empowering foreign corporations to completely circumvent a domestic legal system and have their case against a sovereign government heard by an extrajudicial tribunal of three private attorneys has been that some domestic legal systems are too ill-functioning to trust.  That accusation is hardly one that either the U.S. or EU are likely to levy at each other. Again, from the report: 

“One of the usual arguments for investor-state arbitration – the need to grant legal security to attract foreign investors to countries with weak court systems – turns to dust in the context of TTIP. If US and EU investors already make up for more than half of foreign direct investment in each others' economies, then it is clear that investors seem to be happy enough with the rule of law on both sides of the Atlantic.”

For more information about the dangers of the investor-state regime and its expansion through TAFTA, please check out the full report.

May 16, 2013

Flood of 10,000 Critical Public Comments Spotlights TAFTA Controversy

First House Hearing Today on the Trans-Atlantic Free Trade Agreement

Submission of more than 10,000 public comments on the Trans-Atlantic Free Trade Agreement (TAFTA) to the U.S. Trade Representative’s (USTR) docket last week punctured the notion that the pact will avoid the controversies that have dogged past trade deals. The cause of controversy is that negotiations will focus primarily on “behind-the-border policies and “regulatory and other non-tariff barriers,” given tariffs between the United States and EU are already quite low.

Critical comments were submitted by a panoply of consumer, farmer, labor, environmental, health and tech groups concerned about the negotiations being used to roll back critical public interest safeguards. In addition, nearly 10,000 comments were generated in 32 hours after an email sent by Rep. Alan Grayson (D-Fla.) alerted the public that the deal is slated to include controversial “investor-state” provisions. The investor-state proposal 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. The investor-state system has generated controversy across the political spectrum. Conservatives have objected to the notion that the United States would be subjected to the jurisdiction of United Nations and World Bank tribunals. Progressives have viewed the system as a backdoor means to attack domestic health and safety policies.

To date, most U.S. agreements including investor-state enforcement have been with developing countries. TAFTA would break that mold, empowering corporations to circumvent the U.S. and EU court systems, not typically criticized for being unfriendly to investors, to attack U.S. and EU policies in extrajudicial tribunals. As a result, foreign firms operating in the United States would enjoy greater rights than those provided to domestic firms. Moreover, because many European firms are established here, U.S. taxpayers would face unprecedented liability from investor-state suits, in contrast to past U.S. pacts with developing countries whose firms have relatively few investments in the United States.

In contrast to the bulk of public comments on TAFTA, the four witnesses presenting to the House Ways and Means Trade Subcommittee in Congress’ first hearing today on proposed TAFTA negotiations all represent business interests. This includes two witnesses representing the trans-Atlantic coalition of large corporations that has pushed for TAFTA negotiations for years. The business interests view TAFTA negotiations as a means to eliminate an array of consumer, environmental and other public interest safeguards that they have identified as “trade irritants.” The corporate agenda is closely mirrored by the official framework for talks announced in February in a report of a high-level U.S.-EU government commission, advised by many of the same corporate interests. 

Despite growing public scrutiny of the  TAFTA proposal, President Obama met this week with British Prime Minister David Cameron, to discuss how to rush the completion of this sweeping “trade” agreement by the end of next year. Obama and Cameron announced plans to launch formal talks during the G8 Summit in Northern Ireland next month.

What Generated 10,000 Comments in 32 Hours: Proposed Inclusion of the “Investor-State” System that Would Empower Foreign Corporations to Challenge the U.S. Government in Extrajudicial Tribunals, Undermine Domestic Public Interest Policies, and Cost U.S. Taxpayers Millions

U.S. and EU officials have confirmed that they plan to include  in TAFTA a mechanism included in  prior U.S. “free trade” agreements (FTAs) called “investor-state dispute resolution.” This mechanism, which is facing growing controversy in many countries, elevates foreign corporations to the level of sovereign governments, empowering them to privately enforce the terms of a public treaty. This is done with trade pact terms that authorize individual foreign firms and investors to skirt domestic laws and courts and directly challenge signatory countries’ public interest policies before foreign tribunals, demanding taxpayer compensation for claims that those policies undermined investors’ expectations. The cases are decided by panels comprised of three private sector attorneys, unaccountable to any electorate, who rotate between serving as "judges" and bringing cases against governments for corporations.

Foreign investors have used the broad “rights” granted by this system, which are superior to those afforded to domestic firms, to demand taxpayer compensation for environmental, energy, land-use, toxics, water, mining, labor, and other non-trade domestic policies that they allege undermine their “expected future profits.” A recent Bloomberg exposé “Coup d’Etat to Trade Seen in Billionaire Toxic Lead Fightdetails one such case under the U.S.-Peru FTA. When an investor-state tribunal rules in favor of the foreign investor, the government must hand the corporation an amount of taxpayer money decided by the tribunal. There is no appeal mechanism. Even when governments win, they often must pay for the tribunal’s costs and legal fees, which average $8 million per case, wasting scarce resources to defend public interest policies against corporate challenges.

More than $380 million in taxpayer compensation has already been paid out to foreign corporations in a series of investor-state cases brought under the North American Free Trade Agreement (NAFTA) and related U.S. FTAs. Of the over $14 billion in the 18 pending claims under NAFTA-style deals, all relate to environmental, energy, land use, public health and transportation policies – not traditional trade issues. In November 2012, U.S. pharmaceutical corporation Eli Lilly used the investor-state provisions of NAFTA to attack Canada’s entire legal basis for granting patents, demanding $100 million in compensation.

The investor-state system was initially established to provide a venue for foreign investors to obtain compensation when a government expropriated an investment in a country that did not have a well-functioning domestic court system. In the past, it was included in pacts between a developed and developing country with the developed country firms launching investor-state cases against developing country governments. The United States was not exposed to significant liability under this regime because the only agreement that included a major capital-exporting country was NAFTA. Ninety percent of investor-state challenges against the United States under NAFTA have come from Canadian firms. Inclusion of this regime in an FTA with the EU would expose U.S. taxpayers to enormous new liabilities.

The global World Trade Organization rules do not include private enforcement. Thus, EU corporations currently do not enjoy greater legal privileges than U.S. firms and cannot directly challenge the U.S. government in foreign tribunals over U.S. domestic policies. If TAFTA is enacted with investor-state provisions, EU corporations would be newly empowered to demand U.S. taxpayer compensation for being required to comply with the same policies enacted by Congress and state legislatures that apply to domestic firms. U.S. corporations would gain the same privileges in EU countries.

 Growing Public Outcry over TAFTA

When Rep. Grayson alerted citizens of TAFTA’s proposed inclusion of the investor-state regime, nearly 10,000 individuals submitted comments within 32 hours to denounce the extreme provision as an affront to democracy and the public interest. In addition, more than 370 groups and individuals filed concerns and remarks on the deal in response to USTR’s invitation for public input. Below are links to comments submitted by the diverse array of organizations concerned about TAFTA’s threats to food safety, climate change policy, family farmers, Internet freedom, workers’ rights, access to medicines, financial regulation and other critical public interest objectives.

Public Citizen: http://www.citizen.org/documents/TAFTA-comments.pdf

Rep. Alan Grayson (D-Fla.): http://graysonforcongress.com/news/grayson-army-opposes-corporatocracy-nearly-10000-submit-comments-against-trade-deal-sell-outs

Sierra Club: http://action.sierraclub.org/site/DocServer/TTIP__Federal_Register__May_10.pdf?docID=13041

AFL-CIO: http://www.regulations.gov/contentStreamer?objectId=09000064812db32c&disposition=attachment&contentType=pdf

National Farmers Union: http://nfu.org/images/stories/policy/05%2010%2013%20Transatlantic%20Trade%20-%20USTR.PDF

Electronic Frontier Foundation: https://www.eff.org/deeplinks/2013/05/dear-us-trade-rep-dont-shut-the-public-out-from-us-eu-trade-negotiations

Coalition for Sensible Safeguards:

http://www.regulations.gov/contentStreamer?objectId=09000064812da20b&disposition=attachment&contentType=pdf

Consumer Federation of America: http://www.consumerfed.org/pdfs/TTIP-Comments-Consumer-Federation-of-America.pdf  

Library Copyright Alliance: http://www.librarycopyrightalliance.org/bm~doc/lca-ttip-comments-final-10may13.pdf

U.S. Public Interest Research Group: http://www.regulations.gov/contentStreamer?objectId=09000064812dac68&disposition=attachment&contentType=pdf  

Food and Water Watch: http://www.regulations.gov/contentStreamer?objectId=09000064812da8d4&disposition=attachment&contentType=pdf

International Association of Machinists and Aerospace Workers: http://www.regulations.gov/contentStreamer?objectId=09000064812bff6b&disposition=attachment&contentType=pdf  

Citizens Trade Campaign: http://www.regulations.gov/contentStreamer?objectId=09000064812d898d&disposition=attachment&contentType=msw8

United Steelworkers:

http://www.regulations.gov/contentStreamer?objectId=09000064812d8ce7&disposition=attachment&contentType=pdf

Center for Food Safety: http://www.regulations.gov/contentStreamer?objectId=09000064812da7a4&disposition=attachment&contentType=pdf    

Public Knowledge: http://publicknowledge.org/files/PK%20TTIP%20comments.pdf

Communications Workers of America: http://www.regulations.gov/contentStreamer?objectId=09000064812d7715&disposition=attachment&contentType=pdf

Center for Democracy and Technology: https://www.cdt.org/files/pdfs/CDT-TTIP-Comments-5-10-13.pdf

Center for Digital Democracy: http://www.centerfordigitaldemocracy.org/sites/default/files/CDDUSTRMay102013.pdf  

Maine Citizen Trade Policy Commission: http://www.regulations.gov/contentStreamer?objectId=09000064812dc78a&disposition=attachment&contentType=pdf

Knowledge Ecology International: http://keionline.org/sites/default/files/KEIcomments_TTIP_9May2013.pdf

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 01, 2013

12 Latin American Governments Gather to Confront Extreme Investor Privileges Regime

Rueda_de_prensa_22_abr_13_1

Last week 12 Latin American governments gathered in Guayaquil, Ecuador to craft a common response to an increasingly common menace: costly "investor-state" suits in which foreign corporations are dragging sovereign governments to extrajudicial courts to demand taxpayer compensation for health, environmental, and other public interest policies.   

Ecuador, the host of this "Ministerial Conference of Latin American States Affected by Transnational Interests," has taken a particularly hard battering from the investor-state system enshrined in NAFTA-style Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs).  The country currently faces a ruling from one tribunal to hand $2.4 billion to Occidental Petroleum after Oxy broke Ecuador's hydrocarbons law, while confronting a ruling from another tribunal that the government should breach its own Constitution and block the enforcement of an $18 billion court ruling against Chevron for massive pollution of the Amazon.  Many of the other countries present have also faced a taxing litany of investor-state cases in recent years: Mexico (e.g. losing $170 million in a NAFTA-created tribunal to the same U.S. agribusinesses that, under the same NAFTA, displaced over two million farmers), Argentina (e.g. losing a slew of cases to foreign financial firms for using financial regulations to mitigate the country's 2001 financial crisis), Guatemala (e.g. losing $13 million to a railroad company that failed to build a railroad because the tribunal thought that the government had failed to fulfill the company's expectations), etc.  

These countries have indeed been "affected by transnational interests."  And they are tired of it.  

So they put together a conference, officiated by Ecuador's foreign minister Ricardo Patiño, to address the investor-state system that has empowered a multitude of foreign corporations to mount a skyrocketing number of challenges against the public policies of sovereign goernments.  Several civil society organizations from around the world attended to deliver presentations on the dangers of the investor-state system.  I was there on behalf of Public Citizen and summarized the exceptionally broad privileges that unaccountable tribunals have granted to foreign investors in this Wild West frontier of international law, and the equally broad array of public interest policies that have been directly attacked as a result.  Cecilia Olivet of the Transnational Institute detailed the deep conflicts of interest among the private attorneys who alternate between acting as judges in investor-state tribunals and as prosecuting lawyers who bring the cases on behalf of corporations.  Martin Khor of the South Centre explained that while attacks on public interest policies have grown under this investor-state system, foreign investment (the ostensible objective for such an extreme system) has not--study after study has shown no correlation between binding a country's policies to this anomalous regime and attracting foreign direct investment.  

At the end of the day, seven of the governments present signed a declaration to coordinate efforts in seeking to replace the investor-state regime with an alternative investment framework that respects sovereignty, democracy, and public wellbeing.  They announced the launch of an International Observatory, a intergovernmental commission based in Latin America to audit investor-state tribunals, draft alternative investment agreements, and collaborate in strategies for reform.  The group will be headed by an executive committee that will help Latin American countries exchange information about emergent investor-state cases and collaborate in mounting defenses against such claims.  Representatives from the remaining five governments participated as observers and are now taking the declaration back to their capitals to discuss joining the emerging Latin American coalition.  

By launching this effort, these dozen Latin American countries are joining a mounting effort by governments to halt, renegotiate, or leave the now-notorious investor-state system.  Australia has publicly refused to sign on to the proposed expansion of the extreme regime in the Trans-Pacific Partnership FTA, despite significant U.S. pressure to do so.  India has moved to abolish investor-state dispute clauses in FTAs.  South Africa is re-examining its policy on investor-state disputes and has refused to renew BITs with the EU.  And now Ecuador's National Assembly is considering a bill to terminate its investor-state-embodying BIT with the United States.  Last week's conference adds another dash of momentum to this growing global push to ditch this rather radical regime.

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" »

April 11, 2013

Foreign Corporations Launched Record Number of Investor-State Attacks on Public Policies in 2012

A report released yesterday by the United Nations Conference on Trade and Development (UNCTAD) reveals that foreign corporations are taking governments to court under the notorious investor-state system at an alarming and increasing rate. In 2012, 62 new investor-state cases were filed - of the known 518 cases to date – which is the highest number of investor-state cases ever filed in a year. In 68% of these cases, it was a developing country whose health, environmental or other public policy was being directly challenged by a foreign firm. The report noted that the firms that have launched investor-state cases to date are predominantly U.S. corporations. These cases are decided by tribunals that sit outside of any domestic legal system, typically comprised of three private sector attorneys. Of the cases publicly decided in 2012, 70% of the victories went to the foreign investor, requiring the government to compensate the firm. 

Investor-state arbitrations in 2012 revealed an increasing trend in foreign investors' attacks against states’ nondiscriminatory public interest policies, including changes to domestic regulatory frameworks concerning nuclear energy and currency stability, revocation of mining and oil licenses (often in response to contract violations), and numerous other government measures affecting public health, financial stability, access to essential services and the environment. The UN report concluded that the “trend of investors challenging generally applicable public policies, contradictory decisions issued by tribunals, an increasing number of dissenting opinions, [and] concerns about arbitrators’ potential conflicts of interest all illustrate the problems inherent in the system.”

UNCTAD Graph
In addition to setting the record for most new cases filed in a year, 2012 also broke the record for the largest ever investor-state "award," the taxpayer-funded penalty that a tribunal orders a government to pay to a foreign investor when the tribunal rules against the government. In Occidental v. Ecuador, the tribunal ordered Ecuador to pay Occidental Petroleum Corporation around 1.8 billion dollars, which rose to more than $2.4 billion with interest and fees -- roughly the government's annual expenditure on health care for half the country. The tribunal ruled against Ecuador for the government's termination of an oil contract that Occidental had violated (which the tribunal acknowledged).  To calculate the historic penalty imposed on Ecuadorian taxpayers, two of the tribunalists used logic described by the third tribunalist as "egregious."  

These disturbing trends underlie the growing demands to reform the investor-state dispute system. Upon releasing the report, James Zhan, Director of UNCTAD’s Division on Investment and Enterprise, said that the rise in the investor-state system's "cross-cutting challenges...gives credence to calls for reform of the investment arbitration system.” He noted, “the [investor-state] mechanism is already a source of considered reflection in numerous bilateral and regional [trade and investment] negotiations.” 

One of those negotiations is the Trans-Pacific Partnership (TPP), the sweeping NAFTA-style "trade" deal under negotiation between the U.S. and 10 Pacific Rim nations, which, according to the leaked investment chapter, would expand the investor-state system even further. But the "considered reflection" of other TPP countries has made them wary of binding themselves to a system that has delivered a mounting number of costly attacks on the public interest policies of 95 countries. Australia has already refused to sign on to any investor-state provisions. Other countries may follow their lead. In the meantime, global resistance to the extreme investor-state system is growing, with countries like Brazil, India, South Africa, and Ecuador rejecting its threats to democratic policymaking in the public interest. As investor-state cases continue to soar, public and governmental opposition is following suit. 

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