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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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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.

September 17, 2014

Pharmaceutical CEO: This Controversial Deal Will Be Great for Us…And You (Trust Us)

In an op-ed appearing in Forbes on Tuesday, the CEO of Eli Lilly, a U.S. pharmaceutical corporation, paints a glowing picture of how the proposed Trans-Atlantic Free Trade Agreement (TAFTA) would benefit consumers on both sides of the Atlantic – but it’s pure fantasy.

It is not surprising that Eli Lilly is cheerleading this controversial deal. This is the same pharmaceutical firm that is using the North American Free Trade Agreement (NAFTA) – TAFTA’s predecessor – to challenge Canada’s legal standards for granting patents and demand $500 million in taxpayer compensation.

John Lechleiter, Lilly’s CEO, shrouds his arguments under the guise of “free trade,” while in reality Lilly’s TAFTA proposals are a plea for increased government protection for his company and expansion of the monopolistic business model upon which the multinational pharmaceutical industry relies.

This post will take on Mr. Lechleiter’s claims, one by one.

Continue reading "Pharmaceutical CEO: This Controversial Deal Will Be Great for Us…And You (Trust Us)" »

July 03, 2014

Let’s Just Pretend We Didn’t Offshore Manufacturing

Is an iPhone made in China and exported to Europe a U.S. export?

Is an Apple executive a manufacturing worker?

Yes, and yes.  At least those could become the answers if a new proposal afoot among some in the administration is allowed to take effect.  Federal agencies grouped under the bland-sounding Economic Classification Policy Committee (ECPC) are proposing to radically redefine U.S. manufacturing and trade statistics. 

Under the proposal, U.S. firms that have offshored their production abroad – like Apple – would become “factoryless goods” manufacturers.  The foreign factories that actually manufacture the goods – like the notorious iPhone-producing Foxconn factories in China – would no longer be manufacturers, but “service” providers for the rebranded “manufacturing” firms like Apple.

It appears the administration has been reading Orwell

But the problem with this proposed redefinition is not merely that it offends common sense.  The “factoryless goods” proposal would deceptively deflate the size of reported, but not actual, U.S. manufacturing trade deficits, while artificially inflating the number of U.S. manufacturing jobs overnight.

While some details of the proposal remain open-ended, one thing is clear: this maneuver would obscure the erosion of U.S. manufacturing.  It would disguise the mass-offshoring of U.S. middle-class factory jobs incentivized by NAFTA-style trade deals.  It would undermine efforts to change the unfair trade and other policies that have led to such decline.  

To boost U.S. manufacturing jobs and production, we need to switch our policies, not our numbers.

The ECPC is accepting comments on their “factoryless goods” proposal until July 21.  If you’d care to offer your thoughts, click here.
  

The 3 Big Distortions of the "Factoryless Goods" Proposal
  

1.  The proposal would result in a fabricated reduction of the U.S. manufacturing trade deficit by rebranding imports of U.S. manufactured goods as “services” imports, according to recent explanations offered by officials of ECPC member agencies.  The redefinition would not affect all U.S. trade statistics, but it would distort some of the most widely-reported numbers (those calculated on a balance of payments basis), misleading the public and policymakers alike.

Take, for example, a scenario in which Apple ships iPhone parts to China to be assembled in a Foxconn factory and then sent back to the United States to be sold here.  Currently, the value of the imported iPhone minus the lesser value of the exported parts counts as a net U.S. import of a manufactured good.  This reflects the fact that Apple offshored its iPhone manufacturing to China.

But under the ECPC proposal, Foxconn, now called a “manufacturing services provider,” would not be described as having manufactured the iPhones but as having provided services to Apple.  As a result, the net U.S. import of manufactured goods resulting from Apple’s decision to offshore would be reduced. In its place would be an import of Foxconn’s factory “services.”
  

2.  The proposal would treat some goods exported by foreign factories as U.S. manufactured exports.  Take a scenario in which Apple ships iPhone parts to China that are assembled by Foxconn and then shipped to the European Union (EU).  Currently, Apple’s export of parts to China counts as the only U.S. export in this scenario. 

But the ECPC proposal, according to officials of ECPC member agencies, would instead count China’s export of the fully-assembled iPhones to the EU, less the cost of any imported parts, as a “U.S. manufactured goods export.”

The absurd logic of this rebranding is that while China manufactured and exported the iPhones, they count as U.S. manufactured exports because they were under the control of a U.S. brand.  This Orwellian proposal would spell an artificial increase in U.S. manufactured exports (on a balance of payments basis), further belying the real U.S. manufacturing trade deficit.
  

 3.  The proposal would spur a disingenuous, overnight increase in the number of U.S. “manufacturing” jobs as white-collar employees in firms like Apple – now rebranded as “factoryless goods producers” – would suddenly be counted as “manufacturing” workers. 

This change would also create a false increase in manufacturing wages, as many of the newly-counted “manufacturing” jobs would be designers, programmers and brand managers at “factoryless goods producers” like Apple. 

Reported U.S. manufacturing output would also abruptly and errantly jump, as revenues from firms like Apple would be lumped in with the output of actual manufacturers. 
  

This proposal defies common sense.  It would dramatically distort U.S. trade, labor and gross domestic product statistics.  Goods manufactured abroad and imported into the United States are not something other than manufactured goods imports.  Goods exported from foreign factories do not become “U.S. exports” when they are produced for U.S. brands.  And jobs in which workers spend zero time actually manufacturing anything are not “manufacturing jobs.”  

The offshoring of U.S. manufacturing under years of unfair trade policies cannot be undone with a data trick.  The hoped-for “renaissance” of U.S. manufacturing will come through new policymaking informed by accurate data, not politically convenient distortions.  

April 17, 2014

Corporate Group Launches “Fact-Based” Trade Series, Avoids Facts

When launching a new series of materials touted as “fact-based analysis,” it is unwise to begin with a distortion of the facts.  But that’s the inauspicious move taken today by the Emergency Committee for American Trade (ECAT), a corporate alliance that has launched a new “Trade Notes” series with some confused data on the record of U.S. trade under “free trade” agreements (FTAs).  

Official government data show that U.S. trade deficits have ballooned with FTA partners while actually diminishing with the rest of the world.  As we reported recently, the aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion, or 443%, since the FTAs were implemented.  In contrast, the aggregate deficit with all non-FTA countries (even including China) has decreased by more than $130 billion, or 16%, since 2006 (the median entry date of existing FTAs). 

Two factors explain this proclivity toward trade deficits with FTA partner countries.  First, imports from those countries have spiked – an unsurprising result of a trade model that has incentivized offshoring and pitted U.S. workers against their lower-wage counterparts abroad.  Second, and perhaps more surprising, is that U.S. export growth to FTA partner countries, despite all promises to the contrary, has been slower than to non-FTA countries. Indeed, 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.

But that isn’t the takeaway from ECAT’s Trade Notes debut today.  In response to “some commentators [who] have argued that trade agreements drive growth in U.S. trade deficits,” ECAT asserts, “recent data suggest that trade agreements, on the whole, actually help to improve U.S. trade balances with FTA partner countries.” 

How can ECAT make this claim?  First, they take oil and gas out of the trade data. Echoing the refrain of many FTA proponents that burgeoning FTA deficits are just about oil imports, ECAT displays a chart that appears to show aggregate non-oil trade deficits with FTA partners diminishing and then turning into surpluses over the last decade.

But the official government data beg to differ.  Even if we remove oil and gas, the non-oil U.S. goods trade balance last year with all U.S. FTA partners was a $100 billion deficit, not a surplus. And while ECAT claims that the non-oil trade balance with FTA countries has been improving, the non-oil U.S. trade deficit with these 20 countries was larger last year than in any of the last six years. 

What, then, explains the gulf between the data and ECAT’s claim of a growing non-oil surplus with FTA countries?  The primary explanation is that ECAT – like the U.S. Trade Representative and fellow corporate conglomerates such as the Chamber of Commerce, National Association of Manufacturers, Business Roundtable, etc. – has decided to count foreign-made exports as U.S. exports.  As we’ve explained time and again, determining FTAs’ impacts on U.S. jobs requires counting only U.S.-made exports.  Instead, ECAT also counts “re-exports” – goods made abroad that are shipped through the United States en route to a final destination.  As re-exports to FTA partner countries have been steadily increasing, counting them in trade data – as ECAT does – has had an increasingly distortionary effect on the true record of FTAs (e.g. you can make the NAFTA deficit look half as big simply by counting foreign-made re-exports as U.S. exports). 

In announcing today’s new Trade Note series, ECAT President Calman Cohen stated, “ECAT member companies recognize the importance of maintaining a fact-based dialogue on the contribution of trade and investment to our national economic interest.  ECAT seeks to make a constructive contribution to that dialogue through its new Trade Notes series.”

We’re all for contributions to fact-based dialogue.  Let’s hope we start seeing some from ECAT.  

March 28, 2014

U.S. Trade Deficits Have Grown More Than 440% with FTA Countries, but Declined 16% with Non-FTA Countries

The aggregate U.S. goods trade deficit with Free Trade Agreement (FTA) partners is more than five times as high as before the deals went into effect, while the aggregate deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations. Incredibly, the U.S. Chamber of Commerce website states, “For those worried about the U.S. trade deficit, trade agreements are clearly the solution – not the problem.” Their pitch ignores the import surges contributing to growing deficits and job loss, while their export “data” is inflated, using tricks described below.

The aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion (inflation-adjusted) since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $130 billion since 2006 (the median entry date of existing FTAs). Two reasons: a sharp increase in imports from FTA partners and significantly lower export growth to FTA partners than to non-FTA nations over the last decade. Using the Obama administration’s net exports-to-jobs ratiothe FTA trade deficit surge implies the loss of about 800,000 U.S. jobs. Trade with Canada and Mexico (our first and third largest trade partners, respectively) contributed the most to the widening FTA deficit. Under the North American Free Trade Agreement (NAFTA), the U.S. deficit with Canada ballooned and the small U.S. surplus with Mexico turned into a nearly $100 billion deficit. The trend persists under new FTAs – two years into the Korea FTA, the U.S. trade deficit with Korea has jumped more than 51 percent. Reducing the massive trade deficit requires a new trade agreement model, not more of the same.

U.S. Export Growth Falters under FTAs

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. Between 2003 and 2013, U.S. goods exports to FTA partner countries grew by an annual average rate of only 4.9 percent. Goods exports to non-FTA partner countries, by contrast, grew by 6.3 percent per year on average. Since 2006, when the number of FTA partner countries nearly doubled with the implementation of the Central America Free Trade Agreement (CAFTA), the FTA export growth “penalty” has only increased. Since then, average U.S. export growth to non-FTA partner countries has topped average export growth to FTA partners by 47 percent.

Corporate FTA Boosters Use Errant Methods to Claim Higher Exports under FTAs

Members of Congress will invariably be shown data by defenders of our status quo trade policy that appear to indicate that FTAs have generated an export boom. Indeed, to promote congressional support for new NAFTA-style FTAs, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) have funded an entire body of research designed to create the appearance that the existing pacts have both boosted exports and reversed trade deficits with FTA partner countries. This work relies on several methodological tricks that fail basic standards of accuracy:

  • Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.
  • Counting “re-exports:” NAM has misleadingly claimed that the United States has a manufacturing surplus with FTA nations by counting as U.S. exports goods that actually are made overseas – not by U.S. workers. NAM’s data include “re-exports” – goods made elsewhere that are shipped through the United States en route to a final destination. Determining FTAs’ impact on U.S. jobs requires counting only U.S.-made exports.
  • Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 443 percent aggregate FTA deficit surge, its omission vastly skews the findings.
  • Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.
  • Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $251 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.

Chart: U.S. Trade Deficit Rises by $147 Billion with FTA Partners, Falls by $131 Billion with Rest of the World

FTA v non-FTA 3

March 04, 2014

The 2014 Trade Agenda: What Hole? Keep Digging.

The President’s 2014 Trade Policy Agenda, released today by the Office of the U.S. Trade Representative (USTR), violates the first law of holes: when you are in one, stop digging. Instead, it sticks to the first rule of PR, when the data is against you (e.g. when export growth under last year's trade agenda amounted to zero percent), distract. 

In the face of large U.S. trade deficits with Free Trade Agreement (FTA) partners, the report declines to count imports and counts exports when convenient. It tries to camouflage the damaging track record of past deals (“forget about the hole”) to sell to the U.S. Congress and public yet another round of FTAs (“just keep digging”). 

The report states that the administration is “working with Congress” to gain Fast Track authority to enact two sweeping and controversial new FTAs – the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA). It neglects to mention that, having seen the hole created by past Fast Tracked FTAs, members of Congress have stated in overwhelming, bipartisan fashion that they have no interest in handing the administration another shovel labeled “Fast Track.”

Much of the 2014 agenda is a copy and paste of the 2013 agenda, reiterating USTR’s stock set of talking points, such as the tired, counterfactual promise that a more-of-the-same trade policy will boost exports. In 2013, this is how USTR put it: “The Obama Administration’s trade policy helps U.S. exporters gain access to billions of customers beyond our borders to support economic growth in the United States and in markets worldwide.” This year they invert the sentence: “We seek to…strengthen our economy by…negotiating high standard agreements that help U.S. exporters gain access to billions of customers beyond our borders.”

But repetition does not make the argument any truer. Under the array of FTAs that have served as a template for the Obama administration’s trade policy agenda, U.S. exports grew by a grand total of 0% last year. The year before that, they grew by 2%.  At the abysmal export growth rate seen in the last two years, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule. (The authors of this year’s Trade Policy Agenda opt not to highlight the ill-fated goal.)  

Also omitted is the inconvenient fact that 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.  

Even more glaring is the report's lack of any mention of how exports to Korea have fared under the Korea FTA, which has its second anniversary in less than two weeks, despite detailing export performance to other countries. Under the Korea FTA, which served as the administration’s opening offer for the TPP negotiations, U.S. goods exports to Korea have fallen below the average monthly level seen before the FTA for 20 out of 21 months. Rather than deal with this reality, the report tries to hide it.

The data simply do not support the oft-parroted pitch that more-of-the-same FTAs are the ticket to boosting exports. 

But data is not the report’s strong suit. In defending existing deals like the North American Free Trade Agreement (NAFTA) and the Korea FTA so as to advocate for expanding on their model via the TPP and TAFTA, the report simply ignores the deals' track records. For example, on manufacturing, the report states: “to support the growth of advanced manufacturing and associated high-quality jobs here at home, in 2014 the Obama Administration will continue to pursue trade policies aimed at keeping American manufacturers competitive with their global peers.”

But official government data show that our manufacturing trade deficits have increased dramatically under the very trade policies that the administration vows to “continue to pursue.” Last year, we had a $52.4 billion manufacturing trade deficit with our 20 FTA partners. In 1993, before NAFTA was implemented and before 18 of these 20 countries had an FTA with the United States, we had a $30.1 billion manufacturing trade surplus with these same trade partners.  In the intervening 20 years, during which the United States implemented FTAs with all of these countries, the U.S. manufacturing trade balance with these trade partners fell by $82.6 billion. According to the administration’s own figures, that amounts to a loss of more than 446,000 U.S. jobs in manufacturing alone.

When directly addressing NAFTA, the report chooses to ignore one half of the trade flow equation and focus only on exports. It fails to mention that imports from Mexico and Canada under NAFTA have swamped exports, causing the NAFTA trade deficit to soar 556 percent, reaching $177 billion last year.

And while the report claims that “the agricultural sector has been a bright spot for exports,” that has not been the case under recent FTAs. The average annual U.S. agricultural deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million last year, almost three times the pre-NAFTA level. Over the last decade, U.S. food exports to Mexico and Canada actually fell slightly while U.S. food imports from Mexico and Canada more than doubled.

Food exports have fared even worse under the Korea FTA – in the first year of the deal, U.S. beef, pork, and poultry exports to Korea fell by 8 percent, 24 percent, and 41 percent respectively. 

While ignoring the sluggish exports and deep deficits occurring under existing FTAs (“what hole?”), the 2014 Trade Policy Agenda advocates for the TPP by claiming it would deliver where its predecessors have failed. The report states, “TPP will expand U.S. trade with dynamic economies throughout the rapidly growing Asia-Pacific region.” 

Even if one ignores the disappointing export legacy of the deals serving as the TPP’s template, this sales pitch comes across as hollow. The United States already has FTAs with six of the 11 TPP negotiating countries, for which increased market access is largely not up for negotiation. Of the remaining five TPP countries, Japan is the only major economy, and its growth rate last year was a tepid one percent – hardly the sought-after “dynamism.” The remaining four countries include Vietnam (with an annual per capita income of $1,550), Malaysia (with an annual per capita income of $9,820), New Zealand (with a population the size of metro D.C.), and Brunei (with a population the size of Huntsville, Alabama). Are these the markets on which the administration’s history-defying promise of TPP-led export growth hinge? 

Members of Congress aren’t buying it. Most House Democrats and a sizeable bloc of House Republicans have said no to Fast Tracking the TPP. House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid have also voiced their opposition. So has 62% of the U.S. voting public. Their message to the administration is simple: we’re in a hole. Stop asking for shovels. Find a ladder. 

February 18, 2014

New York Times: Obama's TPP-Promoting Mexico Visit Is "Politically Fraught"

A New York Times story today on Obama's trip to Mexico tomorrow underscores a point we made last week: Obama's visit with the leaders of Mexico and Canada shines a spotlight on NAFTA's 20-year legacy of damage, casting a long shadow on Obama's unpopular attempt to Fast Track through Congress the Trans-Pacific Partnership (TPP), a sweeping pact built on the NAFTA model.  The Times reports:

The whirlwind visit...will offer Mr. Obama a chance to reassure his counterparts about his capacity to deliver at a time when he faces significant hurdles at home. Senator Harry Reid of Nevada and Representative Nancy Pelosi of California, the Democratic leaders in Congress, oppose legislation giving him authority similar to that of his predecessors to negotiate trade deals.

That ill-favored legislation is an attempt to revive Fast Track, the Nixon-era maneuver that empowered the executive branch to unilaterally negotiate and sign sweeping "trade" deals, locking in the contents before Congress got an expedited, no-amendments, limited-debate vote.  In addition to Pelosi and Reid, most House Democrats, a bloc of House Republicans, and about two out of three U.S. voters oppose the administration's current push to renew Fast Track so as to skid the controversial TPP through Congress. 

Among the reasons for the broad opposition to a Fast-Tracked TPP is the 20-year legacy of NAFTA.  For many people throughout North America, NAFTA's damage has been tangible: job losses, wage stagnation, displaced livelihoods, unsafe food, and exposure to toxins.  The Times cited our comprehensive report, released last week, that details the empirical record of NAFTA's damaging first twenty years: 

But even two decades after Nafta, debate still rages about its merits or drawbacks. Ms. Wallach’s group released a report last week compiling government data to argue that not only did Nafta’s promised benefits not materialize, but that many of the results were the opposite of what was promised, citing lost jobs, slower manufacturing and large trade deficits.

It is the lived experience of NAFTA, not an abstract ideology, that has prompted 53 percent of the U.S. public to say that we should “do whatever is necessary” to “renegotiate” or “leave” NAFTA.  Seeing such opposition, Obama promised to renegotiate NAFTA as a presidential candidate in 2008.  His current push to Fast Track the TPP represents a stunning flip-flop that threatens to replicate the very NAFTA-style damage that Obama criticized on the campaign trail.  Incredibly, Obama administration officials are now trying to sell the TPP as honoring Obama's renegotiation promise -- an Orwellian move that our own Lori Wallach has been quick to counter.  The Times reports: 

Michael B. Froman, the president’s trade representative, tried to reassure Democrats on Tuesday that the administration would be sensitive to their concerns about workplace and environmental standards in putting together the new trade pact, the Trans-Pacific Partnership, or TPP. He noted that as a candidate, Mr. Obama promised to renegotiate the North American Free Trade Agreement, known as Nafta.

“And that’s exactly what we’re doing in TPP, upgrading our trading relationships not only with Mexico and Canada but with nine other countries as well,” Mr. Froman said in a speech at the Center for American Progress, a liberal research group in Washington.

That assertion drew scorn from critics. “I don’t think that expanding on the Nafta model and extending it to nine more nations was what the unions, environmental groups or Democratic Party activists had in mind when Obama said he would renegotiate Nafta,” said Lori Wallach, a trade expert at Public Citizen, a liberal advocacy group.

The administration's TPP sales pitch is unlikely to convince the broad majority of the U.S. public that wants to renegotiate NAFTA and halt a NAFTA-expanding TPP.  If NAFTA's two-decade legacy of tumult and hardship makes it politically impossible to Fast Track through Congress the TPP, it would constitute a unique benefit of an otherwise damaging deal.

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.

February 10, 2014

2013 Trade Data: USITC Corrections of Last Week’s Census Data Show Why Obama’s TPP, Fast Track Quest Is in Trouble

This weekend’s U.S. International Trade Commission (USITC) release of corrected 2013 year-end trade data goes a long way in explaining broad congressional and public opposition to the Obama administration’s trade agenda, which is premised on expanding to additional nations a model of trade pacts that the data show are failing most Americans. The data (graphs below) show:

A stunning decline in U.S. exports to Korea, a rise in imports from Korea, and a widening of the U.S. trade deficit under the Korea Free Trade Agreement (FTA).

  • In 20 out of 21 months since the Korea FTA took effect, U.S. goods exports to Korea have fallen below the average monthly level in the year before the deal.
  • U.S. average monthly exports to Korea since the FTA are 12 percent lower than the pre-FTA monthly average, while monthly imports from Korea are up 3 percent.
  • The monthly trade deficit with Korea has ballooned 49 percent compared to the pre-FTA level. These losses amount to tens of thousands of lost U.S. jobs.

Zero growth in U.S. goods exports relative to 2012, placing the United States decades behind in Obama’s stated goal to double exports in five years.

  • Total U.S. goods exports in 2013 actually dropped slightly from 2012 after adjusting for inflation, revealing a negative 0.1 percent growth rate.
  • The data show there is no chance to meet President Obama’s stated goal to double 2009’s exports by the end of this year. At the paltry 1 percent annual export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054, 40 years behind schedule.

A staggering U.S. trade deficit with Canada and Mexico after 20 years of the North American Free Trade Agreement (NAFTA).

  • The 2013 U.S. goods trade deficit with Mexico and Canada was $177 billion - a nearly seven-fold increase above the pre-NAFTA level, when the United States enjoyed a small trade surplus with Mexico and a modest deficit with Canada.
  • Even worse for U.S. workers, the non-oil NAFTA deficit has multiplied more than 13-fold, costing hundreds of thousands of U.S. jobs. Indeed, the share of the combined U.S. trade deficit with Mexico and Canada that is comprised of oil has declined since NAFTA.

Today’s USITC data correct last week’s Census Bureau trade data to remove re-exports – goods made elsewhere that pass through U.S. ports en route to final destinations. The corrected data only heaps further doubt on Obama’s prospects for getting Fast Track trade authority, now publicly opposed by most House Democrats, a sizeable bloc of House Republicans, and Senate Majority Leader Harry Reid. Obama has asked for Fast Track to push through Congress the Trans-Pacific Partnership (TPP), a controversial deal modeled on the Korea FTA and NAFTA.

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

“Many in Congress and the public oppose NAFTA-on-steroids “trade” agreements like the TPP and Fast Track authority to expedite them because past trade deals have proved to be so damaging. Just like today for TPP, in the past we were sold on glorious projections of these deals’ benefits but the actual data show an ever-larger drop in U.S. exports to Korea since that pact and a growing trade deficit, a massive NAFTA trade deficit and overall zero growth for U.S. goods exports relative to last year despite implementation of more-of-the-same trade deals. The White House and the corporate lobby are trying to sell Congress the TPP and Fast Track with the same old promises about export growth and job creation, but today’s data show that under Obama’s only past major trade deal with Korea on which TPP is modeled, U.S. exports dropped dramatically, imports soared and the U.S. lost more jobs to a trade agreement.”

Korea 2013.

Obama Exports 2013.

NAFTA 2013

January 01, 2014

NAFTA at 20: Two Decades of Job Loss, Record Inequality, Mass Displacement, and Corporate Attacks on Environmental and Health Laws

Today marks the 20th anniversary of the implementation of the North American Free Trade Agreement (NAFTA). The promises made by NAFTA proponents and warnings issued by its opponents during the fierce 1993 debate over congressional approval of the pact can now be measured against two decades of actual outcomes. For a detailed analysis of NAFTA's two-decade legacy, check out our new NAFTA at 20 report.

NAFTA was an experiment, establishing a radically new “trade” agreement model. Despite the documented damage caused by 20 years of NAFTA, the Obama administration is now seeking to deepen the NAFTA model and expand it to additional countries through the Trans-Pacific Partnership (TPP), a massive agreement with 11 Asian and Latin American countries. The Clinton administration’s efforts to do the same – through a Free Trade Area of the Americas and an Asia-Pacific Economic Cooperation (APEC) Free Trade Agreement (FTA) – were rejected by negotiating partners as the damaging results of NAFTA became apparent.

NAFTA was fundamentally different than past trade agreements in that it was only partially about trade. Indeed, it shattered the boundaries of past U.S. trade pacts, which had focused narrowly on cutting tariffs and easing quotas. In contrast, NAFTA created new privileges and protections for foreign investors that incentivized the offshoring of investment and jobs by eliminating many of the risks normally associated with moving production to low-wage countries. NAFTA allowed foreign investors to directly challenge before foreign tribunals domestic policies and actions, demanding government compensation for policies that they claimed undermined their expected future profits. NAFTA also contained chapters that required the three countries to limit regulation of services, such as trucking and banking; extend medicine patent monopolies; limit food and product safety standards and border inspection; and waive domestic procurement preferences, such as Buy American.

In 1993, NAFTA was sold to the U.S. public with grand promises. NAFTA would create hundreds of thousands of good jobs here – 170,000 per year according the Peterson Institute for International Economics. U.S. farmers would export their way to wealth. NAFTA would bring Mexico to a first-world level of economic prosperity and stability, providing new economic opportunities there that would reduce immigration to the United States. Environmental standards would improve.

Twenty years later, the grand promises made by NAFTA’s proponents remain unfulfilled. Many outcomes are exactly the opposite of what was promised, as detailed in our new NAFTA at 20 report. In sum:

  • Rather than creating the promised 170,000 jobs per year, NAFTA has contributed to an enormous new U.S. trade deficit with Mexico and Canada, which had already equated to an estimated net loss of one million U.S. jobs by 2004. This figure, calculated by the Economic Policy Institute, includes the net balance between jobs created and jobs lost. Much of the job erosion stems from the decisions of U.S. firms to embrace NAFTA’s new foreign investor privileges and relocate production to Mexico to take advantage of its lower wages and weaker environmental standards. The NAFTA-spurred job loss has not abated during NAFTA’s second decade, as the burgeoning post-NAFTA U.S. trade deficit with Canada and Mexico has not declined.
  • 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 as 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.

U.S. Public Opinion Polling Shows Overwhelming Opposition to NAFTA

The U.S. public’s view of NAFTA has shifted from a divide during the time of the NAFTA debate to broad opposition and now to overwhelming opposition to NAFTA-style trade deals. According to a 2012 Angus Reid Public Opinion poll, 53 percent of Americans believe the United States should “do whatever is necessary” to “renegotiate” or “leave” NAFTA, while only 15 percent believe the United States should “continue to be a member of NAFTA.” Rejection of the trade deal is the predominant stance of Democrats, Republicans and independents alike. NAFTA has drawn the ire of Americans across stunningly diverse demographics. A 2011 National Journal poll showed strong rejection of the status quo trade model from both lower-educated and higher-educated respondents, and a 2010 NBC News – Wall Street Journal survey revealed that a majority of upper-income respondents have now joined lower-income respondents in opposing NAFTA-style pacts.

Given NAFTA’s record of diverse damage, it is not surprising that opposition to the TPP – a supersized NAFTA that would be open for any Pacific Rim country to later join – is growing among the U.S. public and in Congress.

For a detailed analysis of NAFTA's two-decade legacy of job loss, income inequality, agricultural instability, corporate attacks on safeguards, and mass displacement, check out our new NAFTA at 20 report.

March 26, 2013

Expanded Analysis: U.S. Pharmaceutical Corporation Uses NAFTA Foreign Investor Privileges to Attack Canada’s Patent Policy

In December we reported that Eli Lilly, the fifth-largest U.S. pharmaceutical corporation, had announced its intent to use the extreme foreign investor privileges enshrined in NAFTA to directly challenge Canada's entire basis for granting patents.  Eli Lilly's audacious attempt, sparked by Canadian courts' invalidation of an Eli Lilly medicine patent, marks the first time a patent-holding pharmaceutical corporation has tried to use the extraordinary investor privileges provided by U.S. “free trade” agreements (FTAs) as a tool to push for greater monopoly patent protections, which increase the cost of medicines for consumers and governments. Because Canada has dared to enforce its own patent policy, Eli Lilly is demanding $100 million in compensation from Canadian taxpayers. 

We've just released an updated and expanded analysis of this worrisome NAFTA attack, available here.  In this expanded briefing paper, we uncover more bogus but dangerous legal claims that Eli Lilly asserts as backing for its attempt to take down Canada's entire legal basis for granting patents.  For example, the corporation accuses Canada of using a patent policy that "contravenes" the company's "expectations."  Eli Lilly claims that NAFTA guarantees the company the "right" to see its expectations fulfilled by the Canadian government.  To make such a cavalier claim, the company ignores the consistent opinions of multiple governments (including the U.S. government) that even NAFTA's sweeping investor protections guarantee no such "right," instead drawing on the inventive interpretations of FTA investor-state tribunals comprised of three private attorneys.  As the U.S. government stated in another NAFTA investor-state case, "if States were prohibited from regulating in any manner that frustrated expectations – or had to compensate for any diminution in profit – they would lose the power to regulate." 

Eli Lilly also invokes the national treatment privileges that NAFTA provides to investors (that governments should treat foreign and domestic investors alike), but instead of using NAFTA's already broad provisions, the company decides to invent a wholly new goverment obligation to foreign investors.  Eli Lilly complains that Canada's patent standards are different from those found in the U.S. and EU, and then asserts that Canada is obliged by NAFTA to enforce those foreign standards.  The notion of such a bizarre obligation is rather unprecedented even among the musings of creative investor-state tribunals.  In short, Eli Lilly is alleging that Canadian taxpayers should fork over $100 million because their government enforced its own patent laws rather than those of other countries.  

Not yet finished, the company alleges an additional national treatment violation by claiming that the Canadian courts' invalidation of its patent for an ADHD drug gives a prohibited advantage to Canadian generic firms that are now allowed to sell the drug.  Um, of course the removal of patents helps generic producers – it always does, but it does so regardless of whether the generic firms and/or the patent holders are foreign or domestic. Were Eli Lilly’s skewed logic to be accepted by the investor-state tribunal, any invalidation of a foreign investor’s patent, regardless of the basis, could be construed as a violation of FTA-protected investor privileges. 

Finally, Eli Lilly argues that Canada's invalidation of its patent monopoly in accordance with the country's established patent policy constitutes an "indirect expropriation" of the pharmaceutical giant's investment.  This avant garde legal claim, one rejected by most nations' courts, would require a government to compensate a corporation even for a nondiscriminatory regulatory policy that happens to diminish the value of the company's "property" (including, according to Eli Lilly, a patent monopoly).  In making this allegation, Eli Lilly skirts the fact that even NAFTA allows nations the flexibility to determine their own patent policy standards, and that such autonomously-defined standards cannot be the basis for claims of "expropriation."  

As far-fetched as Eli Lilly's allegations are, the anomalous investor-state system enshrined in NAFTA-style deals now empowers three attorneys sitting on a FTA-created tribunal (a body that has become notorious for imaginative and sympathetic approaches to investor claims), to determine the validity of Canada's patent policy.  Unfortunately, this radical system would be expanded by the Trans-Pacific Partnership (TPP), a NAFTA-style deal being negotiated between the U.S., Canada, and nine other countries.  The TPP's leaked investment chapter would extend the scope of NAFTA's investor privileges to explicitly cover "intellectual property," making it easier for pharmaceutical corporations to launch Eli-Lilly like attacks on sovereign governments' patent polcies. 

Will Eli Lilly prove successful in undermining Canada's patent laws to protect its patent monopoly in the ironic name of "free trade?"  The outcome of the corporation’s investor-state attack under NAFTA is critical for those seeking to safeguard countries’ ability to determine their own patent standards, a prerogative that is essential for preventing patent “evergreening” and ensuring access to affordable medicines. It is critical not just so that Canadian taxpayers can make sure that the demanded $100 million goes to more worthy ends than enhancing Eli Lilly’s profit margin, but to avoid emboldening other pharmaceutical firms contemplating the launch of similar investor-state demands against other governments that dare to set their own patent policies. As the Eli Lilly case gets underway, negotiations for the TPP and its proposed expansion of the investor-state system continue. Stopping the NAFTA expansion deal presents health advocates with today’s biggest opportunity to halt the advance of the system that empowered Eli Lilly’s audacious threat.

For more analysis of this threat, click here to see our newly expanded briefing paper.  

December 14, 2012

U.S. Corporations Launch Wave of NAFTA Attacks on Canada's Energy, Fracking, and Medicines Policies

U.S. corporations have launched an alarming new offensive against Canadian health and environmental policies under the North American Free Trade Agreement (NAFTA).  Three U.S. firms recently announced plans to use the “trade” pact to seek nearly one billion taxpayer dollars in private, NAFTA-created tribunals as compensation for Canadian policies on fracking, wind energy, and medicine patents. 

Of the three corporate threats, perhaps most worrisome is the notice filed by U.S.-based pharmaceutical giant Eli Lilly, which became public this week.  It marks the first attempt by a patent-holding pharmaceutical corporation to use the investment provisions in NAFTA (or any other U.S. FTA) as a tool to push for greater monopoly patent protections, which elevate the cost of medicines.  (See our comments on the historic move in a post yesterday over at Pharmalot.) 

But how can a foreign corporation directly demand taxpayer compensation from a sovereign government over a democratically-determined policy?  Meet the “investor-state” system.  Written into NAFTA, this system uniquely empowers foreign corporations to skirt domestic laws and courts and directly challenge a government’s public interest policies.  The cases are decided by U.N. and World Bank tribunals typically comprised of three corporate lawyers.  Private corporations have launched these cases against a wide array of health, environmental, financial, and other public interest policies that they allege as undermining “expected future profits.” 

Such cases have soared over the last decade—last year the cumulative number of launched investor-state cases was nine times the cumulative investor-state caseload in 2000.  When the foreign investor wins the case, the government must hand the corporation an amount of taxpayer money decided by the tribunal as compensation for the offending policy.  Under NAFTA-style deals, private investors have already pocketed $365 million in taxpayer money via investor-state cases, while more than $13 billion remains in pending claims.

As three more corporations get in line to use this audacious system against Canada, the country is ironically just joining negotiations for the Trans-Pacific Partnership (TPP), the NAFTA-style deal that would expand the investor-state system further.  With Canada preparing to spend more taxpayer money to defend its environmental, energy, and patent policies, you’d think that the country might soon sour on the investor-state system.  It wouldn’t be the first.  Australia has already publicly refused to be party to the expansive investor-state provisions of the TPP or any other trade deal. 

Here’s a quick summary of the three disputes and the NAFTA-protected “rights” that each investor claims, with a few more wonky details on the particularly dangerous patent dispute:

A Gas Corporation’s Right to Frack the St. Lawrence: In June 2011, Quebec passed a moratorium on the controversial practice of hydraulic fracturing, or fracking, for natural gas.  The provincial government declared the moratorium so as to be able to conduct an environmental impact assessment of the extraction method widely accused of leaching chemicals and gases into groundwater and the air.  Lone Pine Resources, a Delaware-headquartered gas and oil exploration and production company, had plans and permits to engage in fracking on over 30,000 acres of land directly beneath the St. Lawrence River.  Lone Pine argues that the fracking moratorium nullified those permits. In November Lone Pine formally accused Canada of violating its NAFTA obligations by permitting Quebec’s decision to conduct an environmental impact study before determining whether a foreign corporation should inject chemicals into thousands of acres of shale beneath the province’s longest river.  According to Lone Pine, such policymaking contravenes NAFTA’s protections against expropriation and for “fair and equitable treatment.”  As compensation, Lone Pine would like a quarter billion taxpayer dollars. 

An Energy Company’s Right to a Convenient Energy Policy: Ontario’s green energy policy, acclaimed for reducing carbon emissions and creating green jobs, has already come under attack at the World Trade Organization, resulting in last month’s regressive ruling against the successful policy.  Now a U.S.-based energy corporation named Windstream Energy plans to launch an investor-state case over its inability to participate in the green energy program.  The corporation had contracted with Ontario’s provincial government to provide energy generated by an offshore wind farm located in Lake Ontario.  But in February 2011, the provincial government declared a moratorium on offshore wind production, stating that time was needed to study the environmental impacts of the relatively new energy source (currently there are only a few freshwater offshore wind farms in the world). Windstream’s formal notice alleged that the moratorium “effectively annulled the existing regulatory framework” and thus contravened Canada’s NAFTA obligations concerning fair and equitable treatment, expropriation, and discrimination (para. 36).  As compensation for Ontario’s cautious approach to clean energy policymaking, Windstream is pushing for nearly a half billion taxpayer dollars. 

A Pharmaceutical Corporation’s Right to Break Promises but Keep Patents: Indiana-based Eli Lilly, the fifth-largest U.S. pharmaceutical corporation, has notified Canada that it intends to launch an investor-state case against the decision of Canadian courts to invalidate the company’s patent for Strattera, a drug used to treat attention deficit hyperactivity disorder (ADHD).  A Canadian federal court and court of appeals both ruled that the patented drug failed to deliver the benefits that Eli Lilly had promised when applying for the patent’s monopoly protection rights.  The resulting invalidation of the patent paves the way for Canadian drug producers, such as Novopharm—the generic drug company that filed the domestic case, to produce a less expensive, generic version of the ADHD drug. Eli Lilly’s notice argues that Canada’s basis for the patent invalidation—that a pharmaceutical corporation should be required to deliver on its promises of a drug’s utility in order to maintain the drug’s patent—is “discriminatory, arbitrary, unpredictable and remarkably subjective” (para. 43).  The company is pushing for $100 million in taxpayer compensation. 

Eli Lilly’s attack does not just target Canada’s particular treatment of Strattera, but the country’s entire basis for determining patent validity (the “promise doctrine”—that a drug patent will be honored so long as promises regarding the drug’s efficacy are also honored).  As such, the outcome of the case is particularly critical, as a loss for Canada could expose the country to a slew of investor-state attacks from other drug companies with invalidated, promise-breaking patents eager to follow Eli Lilly’s lead.  Indeed, Eli Lilly mentioned in its notice another invalidated patent for an anti-schizophrenia drug named Zyprexa, which Canadian courts have similarly determined to fall short of promised benefits.  Eli Lilly may be considering a second NAFTA investor-state case over that drug. 

In addition, there are rumors that Pfizer may be considering launching its own investor-state case against Canada over, yes, Viagra.  Canada’s Supreme Court has invalidated the Viagra patent on the basis that Pfizer failed to disclose its active ingredient, thereby allowing generic firms to begin competing with Pfizer in production of the erectile dysfunction drug.  While this suit has less to do with Canada’s “promise doctrine,” Pfizer could similarly seek to undermine the patent criteria of Canada’s highest courts by turning to a NAFTA-created private tribunal to demand taxpayer compensation.

In its notice regarding the Strattera patent, Eli Lilly specifically argued that the patent invalidation violated Canada’s NAFTA obligations concerning expropriation, a “minimum standard of treatment,” and national treatment.  If you’re interested in weeds-level analysis, here’s some for each claim:

Expropriation: Eli Lilly claims that the decision of Canadian courts to terminate its Strattera patent for lack of promised utility constituted an expropriation of its “intangible property”—part of NAFTA’s broad definition of a protected “investment.”  NAFTA does not explicitly state that intellectual property (e.g., patents) falls under the definition of an “investment,” though many have assumed the inclusion of patents to be implicit.  But in the TPP, to which Canada is now a negotiating party, the investment chapter leaked earlier this year proposes to explicitly name “intellectual property rights” under the definition of a protected “investment.”   So if Eli Lilly thinks it can define patent invalidation as property expropriation under NAFTA, it certainly could do so under the proposed TPP text.  Thus, if Canada plans to continue its rather incongruous commitments to the TPP and to sovereign determination over how patents are awarded, it should view Eli Lilly’s dispute as a sign of things to come. 

Minimum Standard of Treatment: Eli Lilly’s second claim against Canada is that the rulings of its courts violated the “minimum standard of treatment” that NAFTA signatories are obliged to provide foreign investors.  Sovereign states, such as the United States, have consistently argued that this standard means providing police protection and due process, such as that afforded to Eli Lilly when it defended its patent before Canada’s courts.  But investor-state tribunals have generated increasingly inventive interpretations of the minimum standard, arguing that it also requires governments not to enact policies that could violate expectations foreign investors may have plausibly had upon investing.  As the United States argued in a previous investor-state case, “if States were prohibited from regulating in any manner that frustrated expectations—or had to compensate for any diminution in profit—they would lose the power to regulate” (para. 576).  

Yet, this extreme interpretation is precisely the one on which Eli Lilly relies, accusing Canada’s courts of “contravening” its expectations (para. 100).  Such elastic interpretations have made the minimum-standard-of-treatment claim the single most successful allegation that investors can mount against a state—of every four investor-state cases launched under U.S. treaties in which the investor has won, three cited a “minimum standard of treatment” claim as the basis for the “win.”   

National Treatment: In its final claim, that Canada violated NAFTA’s “national treatment” obligation, Eli Lilly surpasses even the runaway interpretations of past investor-state tribunals.  The national treatment obligation requires governments to afford foreign investors treatment that is “no less favorable” than that afforded to domestic corporations “in like circumstances” (para. 105).  But after quoting this NAFTA definition, Eli Lilly ignores it, inventing instead a standard that would require Canada to afford foreign investors treatment no less favorable than what Canadian companies could hypothetically receive in other countries.  Such a speculative obligation is rather unprecedented, seemingly concocted by Eli Lilly itself.   

The corporation also alleges that the courts’ patent invalidation violates national treatment by advantaging Canadian generic firms that can now create and market generic versions of Strattera.  Here, Eli Lilly presumes to challenge Canadian courts’ removal of a patent on the incredible basis that patent removals help generics.  First, a patent-holding firm and a generic firm plainly do not meet the “in like circumstances” requirement of a national treatment claim concerning a patent (the relevant comparison would be between Eli Lilly and Canadian patent-holding firms).  But more importantly, of course the removal of patents advantages generic producers, but it does so regardless of whether they are foreign or domestic.  Were Eli Lilly’s inventive logic to be accepted by the tribunal, it could jeopardize generic medicines in nearly any country that finds cause to terminate a patent but also finds itself subject to a NAFTA-style treaty.

In sum, the outcome of Eli Lilly’s claim is critical for those seeking to safeguard access to medicines, both in terms of what it means for Canada’s broader policy of ending patents found to not deliver promised results, and in the message it sends to pharmaceutical firms contemplating investor-state attacks on other governments’ policies to control medicine costs.  The dispute, in addition to the investor-state attacks on Quebec’s fracking moratorium and Ontario’s offshore wind moratorium, should also make Canada think twice about the TPP.  While defending its pharmaceutical and environmental policies before unpredictable three-person tribunals created by NAFTA, Canada should reconsider signing up for an expansion of the system that placed those policies under such inordinate threat.  

November 13, 2012

WashPost Ignores Historic Inequality Under NAFTA, Cites Hypothetical Twinkie-Sized Gain

Yesterday the Washington Post’s WonkBlog engaged in some undeserved albeit tepid NAFTA cheerleading by profiling a new NBER study estimating that the deal has brought a tiny increase in real wages.  And I mean tiny—the authors use a mathematical model to project that the deal led to a 0.17% increase in real U.S. wages over a twelve-year period (1993 to 2005).  That means that the average U.S. worker, who was earning $22,000 in 1993, can thank NAFTA’s first twelve years for a real wage increase amounting to a whopping $37.  That’s right—according to the NAFTA-friendly study’s own theorized calculations, each worker should consider the annual worth of NAFTA to be close to that of a box of Twinkies: about three dollars. 

Does such a conclusion merit a blog post entitled “Study: NAFTA Raised Pay Here and Abroad?”  Probably not.  But that’s not the most concerning element of the WonkBlog piece.  The bigger elephant in the post is that “raised pay” from NAFTA is simply not the reality for the majority.  Neither the study nor the blog post address the real story of NAFTA and wages: that the deal has fueled a regressive redistribution of income from average workers to the wealthy.

Trade economists widely acknowledge that any U.S. income increases resulting from NAFTA-style trade deals will tend to disproportionately favor the wealthy while real wage reductions are likely to be the result for the rest of us.  In standard trade theory, the Stolper-Samuelson effect predicts that open trade will create increased demand for U.S. capital-intensive goods and reduced demand for U.S. labor-intensive goods, thereby increasing income for capital owners (i.e. the wealthy) while reducing wages for workers.  Under NAFTA, this regressive impact has moved from theory to reality.  One study by the Economic Policy Institute estimated that even after taking into account consumer savings from cheaper imports, a U.S. household with two median wage earners was losing $1,000 of earnings each year to NAFTA-style trade by 1995, increasing to a $2,000 annual loss by 2006.  The median U.S. worker probably finds little comfort in a new study that averages out gains at the top to transform her real $1,000 trade-related loss into a hypothetical $3 gain. 

The regressive influence of NAFTA-style trade on income distribution may help explain why income inequality in the NAFTA era has reached historical heights, now apparently surpassing even the inequality levels of 1774.  Median real incomes in the U.S. have been falling for the last decade, while the income of the richest 1% has been continually climbing.  Workers’ productivity has been steadily rising while labor’s share of income has been steadily falling.  Why are workers getting paid less while doing more?  Economists from institutions ranging from the Economic Policy Institute to the Federal Reserve have named NAFTA-style trade as a key answer (“increased globalization and trade openness,” in the words of Federal Reserve economists).  So the income-related takeaway from NAFTA is not the deal’s miniscule impact on aggregate wages (whether negative or positive), but its large impact on income inequality. 

But even if we were principally concerned with the miniscule aggregate impact, the study featured in the WonkBlog omits several key factors, calling into question the small positive impact it cites.  First, the study only aims to estimate the impacts of NAFTA’s tariff reductions, which were a focus of only 6 of the deal’s 22 chapters.  The authors make explicit the limitations of disregarding the brunt of the agreement’s content, stating, “Unquestionably, NAFTA had more provisions than only reducing tariff between members and by no means our results should be interpreted as the trade and welfare effects of the entire agreement” (pg. 27).  Non-tariff NAFTA provisions that could impact real wages include those found in the deal’s intellectual property chapter, as Dean Baker notes over at the Center for Economic and Policy Research.  The chapter grants pharmaceutical firms and other corporations anti-competitive patent extensions, which tend to inflate the cost of medicines and other patented products, thereby eroding consumers’ real wages. 

In addition, the wage increase cited by the WonkBlog ignores another side of the tariff reduction coin: loss of tariff revenue for all three NAFTA governments.  The study itself notes that this loss in fiscal revenue actually outweighed the purported real wage gains for Mexico and Canada.  Taking into account reduced tariff income, the authors conclude that the net income effect of NAFTA’s first twelve years is a 0.1% loss for both Canada and Mexico (pg. 25).  In the United States, the lost tariff revenue reduces the Lilliputian wage impact even further, yielding a purported 0.1% net increase to aggregate income.  At that rate, the hypothetical average U.S. worker did not see a gain of $37 under a dozen years of NAFTA, but just $22—less than an average tank of gas.  Meanwhile the actual median worker continues to lose at least $1,000 each year under NAFTA-style trade.  One of these facts seems worthy of a blog post.  One does not.  

September 12, 2012

Let Them Eat Steak: How Costco Totally Makes Up for NAFTA's Sordid Legacy

On Monday, the Washington Post published an article extolling NAFTA for bringing Costco to Mexico.  The article profiled the expansion of the bulk goods behemoth across the Rio Grande as an example of how NAFTA has allowed “Made in USA” products to sweep through Mexico, to the delight of U.S. workers and Mexican consumers.  It’s a happy, albeit misleading, narrative. 

The Post article missed nearly two-thirds of the NAFTA story.  It reported that “trade between the United States and Mexico is surging” thanks to NAFTA.  Indeed.  But 65% of the surge has been in Mexican products imported into the U.S., not U.S. products heading to Mexico.  While U.S. exports to Mexico have more than doubled since NAFTA, imports from Mexico have more than quadrupled (after controlling for inflation).  The net impact on U.S. workers has been the disappearance of hundreds of thousands of jobs as the small pre-NAFTA trade surplus with Mexico has crashed into 17 consecutive years of trade deficits.  Last year the U.S. trade deficit with Mexico topped $100 billion for the first time, accelerating the job atrophy.

Meanwhile, the article portrayed the comparably small rise in U.S. exports as a gift to Mexican consumers, who can now, according to the article, stroll Costco’s wide aisles for “marbled slabs of steak” and “sacks of russet potatoes.”  Really?  The populace that perfected a delectable, corn-based diet should thank NAFTA for steak and potatoes?  While Mexico's small upper-middle class may well enjoy the southward march of Costco, the 51% of Mexicans who now live below the national poverty line—a higher share than at any point in the last decade—are not loading carts with “Made in USA” steak. 

Indeed, for many Mexicans, Costco has meant fewer tamales sold, not more steak bought. The article notes that the NAFTA-encouraged proliferation of megastore chains is “challenging, for better or worse, the traditional mom-and-pop stores doling out soda, eggs and tortillas.”  Let’s see—is that “better” or “worse?”  NAFTA displaced approximately 28,000 small and medium-sized Mexican businesses in just its first four years.  Those who support small business as a means of creating jobs and overcoming poverty will find that NAFTA trend decidedly “worse.”

When newspapers perpetuate narratives that obscure NAFTA’s failures for the majority of workers at home and abroad, policymakers are more prone to replicate the failure.  And replicate they did with last year’s passage of the NAFTA-style deals with Korea, Colombia, and Panama.  With the Korea FTA now in effect since March, we are already starting to see results that all too closely resemble NAFTA’s legacy.  On Tuesday, the U.S. International Trade Commission released data for another month of FTA trade with Korea, revealing a whopping $1.9 billion trade deficit with the country in July alone, 30% above last year’s July deficit.  Overall, the U.S. trade deficit with Korea has risen to $6.8 billion under the first four months of the Korea FTA, as mounting imports have surpassed exports and eroded U.S. jobs. 

Even so, maybe the NAFTA-style deal has at least allowed Korean consumers to enjoy a new influx of Costco’s.  That is, assuming they’ve been willing to jettison small businesses in exchange for steak and potatoes.  

June 21, 2012

Can you say "Déjà vu" in Spanish?

Dear Neighbor:

Congratulations on your inclusion in the elite group of states that are currently negotiating the Trans-Pacific Partnership (TPP) Agreement! Your acceptance into this proposed “historic, 21st century trade agreement” means that much of the “burden” of making laws and regulations for your nation will be taken off of you. No worries; lobbyists for Hollywood and American pharmaceutical companies and more than 600 official “corporate trade advisers” to the Office of United States Trade Representative (USTR) will help take care of the details.

Sorry to mention it, but we’re afraid many of your laws pertaining to intellectual property (IP), affecting issuesACTA Rises from Internet privacy to access to affordable medications, might need a little “tweaking” to ensure they comply with the specifications of U.S. corporate “advisers.” The USTR’s demands at the TPP negotiations read like a wish list from the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Recording Industry Association of America (RIAA), and YOU have the opportunity to grant all their wishes.

You see, the condition the U.S. imposed for Mexico to get a seat at this corporate banquet was that Mexico agree to accept everything that the other countries already have negotiated over the past three years. Sure, NAFTA required some nasty changes to your IP laws. Remember the millions your government wasted trying to lift the U.S. patent on common yellow beans that a bio-prospector filed after NAFTA? Well, wait until you get a look at the 21st century NAFTA on steroids!

As a part of the “historic” TPP negotiations, it is time for your laws to truly reflect your new “21st century” status. For instance, you need to expand pharmaceutical patent protection and create new pharmaceutical monopolies in Mexico. You also need to extend copyright protection to device memory buffers and criminalize circumvention of technological protection measures, limiting fair and educational uses of all kinds of literary and artistic content. Overall, you are expected to introduce new, draconian provisions into Mexican law to lengthen, strengthen and broaden IP monopolies in Mexico.

The strict IP enforcement in this scenario may seem very familiar to you. In fact, you fought off a very similar – although less extreme – attack on your privacy and rights on the Internet in 2011 in the form of the Anti-Counterfeiting Trade Agreement (ACTA). Some objections to ACTA expressed by Mexico Senator Carlos Sotelo Garcia in September 2010 included the opaque nature of the ACTA negotiations, stringent IP enforcement measures (championed by the U.S.), and the “erosion” of access to information technology for approximately thirty million Mexican citizens.

A look at any current media coverage of the TPP will reveal a scene that is eerily familiar and equally concerning. Sorry to break the news, but the opacity of the TPP negotiations makes the ACTA process look like a pinnacle of open government. The TPP has been negotiated entirely in secret, with the only glimpse of the text coming from leaks of the IP, investment and other chapters. Furthermore, each of the negotiating nations has agreed to keep all documents besides the finalized text a secret for four years following the conclusion of negotiations, whether it is ever finalized or not. So whereas the same report by Senator Garcia implemented a working group to review the provisions of ACTA, no such legislative oversight would be possible in the TPP. Apparently the only way to get a look at the “21st century agreement” – even for legislators of the countries in the negotiations – is to introduce a resolution demanding they be allowed to see how trade negotiators are rewriting a nation’s laws. In the U.S, the chairman of the Senate committee with official jurisdiction over TPP, U.S. Sen. Ron Wyden (D-Ore.), has done just that. Yup, the chairman of the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness and his staff were explicitly refused access to even the U.S. negotiators’ proposal to the TPP negotiations.

The legislature of Mexico has already expressed its opinion of trade agreements that restrict privacy and rights on the Internet. On June 21, 2011, the Mexican Congress passed a resolution that urged that the Federal Executive not become a signatory of ACTA:

The Standing Committee of the H. Congress, respectfully urges the Federal Executive Power to, within the framework of its powers, instruct the ministries and agencies involved in negotiating the Anti-Counterfeiting Trade Agreement (ACTA), not to sign the Treaty.

Reading this sort of language coming from the national legislature of a sovereign nation, one might draw the conclusion that ACTA is doomed in that country. But foreign corporate interests have found another foothold in the laws of Mexico – in the form of the TPP. You may have believed that ACTA was dead in Mexico, but, like el chupacabras, it is rising again and this time it is even stronger.

Welcome to the 21st century, dear neighbor.

 

Follow Public Citizen's Global Access to Medicines on Twitter: https://twitter.com/#!/PCMedsAccess
Read more at our webpage: http://citizen.org/Page.aspx?pid=4955

Just Relax, Canada. U.S. Pharma Will Handle It

Dear Fellow Canadians:

Welcome to the Trans-Pacific Partnership (TPP) negotiations! Since you are fresh off a bruising fight getting provisions that protect Internet freedom and privacy into Canada’s copyright Bill C-11, I’m sure that you are exhausted with defending your rights. Take heart. With the TPP, you will not have much of a say on laws or policies threatening your privacy, rights on the Internet or access to affordable medicines. Instead, lobbyists from major American industries and some 600 “corporate trade advisers” have helped lay out some of what the Office of the United States Trade Representative (USTR) expects from you.

These are the same industries that forced major concessions on C-11’s approach to digital locks despite near-universal criticism. Hundreds of pages of new non-trade policy contained in the most sweeping “free trade agreement” could face a mere up or down vote in the House of Commons. And the USTR proposes intellectual property provisions that cover dramatically more than copyright law. They touch a wide range of IP issues.

You thought NAFTA was a pill? Sure, Big PhRMA used NAFTA to attack our drug formulary system and all of those compulsory licenses for affordable meds. But back then, our government drew a line. Despite some considerable hysteria from the U.S. drug industry giants, you did not give away all of our policy space. This time, however, the TPP gives Prime Minister Stephen Harper a way to write all of us a real prescription for high drug prices and cement his view of Canada as an extended playground for corporate America.

Here are some of the highlights of the U.S. proposed IP chapter:

• Expand patent evergreening and create new pharmaceutical monopolies, raising medicine costs;

• Dramatically increase the life of a copyright term from 50 years in most cases under C-11 to 95 years;

• Increase penalties for circumvention and reduce the exceptions for individuals; and

• Establish an American-style notice-and-take down system for online copyright infringement.

This seems like a lot. If you were worried, however, that we had some duty to at least read the proposals for the law and voice our democratic concern, fear not. Negotiators act in secret. The only glimpse of the actual agreement so far has come from leaked copies of the text from the IP, Investment and other chapters. Remember in the good old days of ACTA when the University of Ottawa filed an access-to-information request but received a blacked out document with only the title visible? Expect similar treatment during TPP negotiations. While lobbyists and corporate liaisons are granted electronic access to the agreement, your parliamentary representative might have to walk down to the Department of Foreign Affairs and International Trade to speak personally with The Honourable Ed Fast P.C. , M.P., Minister of International Trade.

Moreover, if you are distressed by the fact that our respectable Department of Trade will have lots of work reviewing all the work done so far once Canada’s negotiators get hold of these secret drafts, you will be relieved to hear that Canada has a lesser role in the negotiations. By coming late to the table, Canada has achieved a second-tier position. This status requires Canada to agree to all the settled chapters, which its officials have not even read, and Canada cannot veto current provisions. Thus, not even lobbyists or the trade minister need concern themselves with settled provisions. The TPP negotiations shut individual citizens and even members of parliament and ministers out of the process.

The public response to C-11 proved that civil engagement has made a difference on intellectual property issues in Canada. The people—frustrated, fearful and bedraggled—woke up to the oppressive measures of industry groups and fought hard. But this is far from the end. In upcoming years, we might still witness the implementation of a multinational corporations’ wish list, which seeks to criminalize copyright infringement, implement ACTA-plus provisions and restrict Canadians’ access to affordable medicines. Through the TPP, the USTR seeks to achieve all these goals and more—without too much of a voice from us. Will we allow American industry to dictate to the Canadian people our rights—or stand up and demand that Canada step down from these negotiations?

Follow Public Citizen's Global Access to Medicines Program: https://twitter.com/#!/PCMedsAccess

James Cormie is a legal intern at Global Access to Medicines Program.  Originally from Edmonton, Alberta, James blogs on issues of trade, IP, and international law.

June 19, 2012

Leaked TPP Chapter Sparks Outrage

The Trans-Pacific Partnership (TPP) Investment Chapter that leaked last week has been making waves. Trade scholars, talking heads, citizens and politicians are all discussing the ramifications of this chapter, which outlines the process that multinational corporations can use to sue governments that enact laws to protect public health, workers’ rights, and the environment.

The leak of this secretive chapter has amplified the voices of bipartisan congressmen and numerous civil society organizations who have long been demanding transparency in the TPP negotiations. Huffington Post ran an article which opened on the front page and has drawn a record number of reader comments- 29,959 to date. The text of the article cites the list of calamitous effects the TPP Investment Chapter could have, including raising the cost of vital medicines and effectively ending “Buy American” preferences for domestic manufacturers. Global Trade Watch Director Lori Wallach warned that "the outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of [trade] negotiations."

The progressive online magazine Salon ran a story warning its readers that TPP could grow “bigger than NAFTA.” Other articles have also appeared in a variety of domestic and international outlets, including RT (which also interviewed our own Todd Tucker), Inside US Trade, The New Zealand Herald, Law360, the Santiago Times and the International Economic Law and Policy Blog, among others.

Wallach has also discussed the leak on numerous radio and television programs. On the news show “Democracy Now,” Lori spoke with Amy Goodman and Juan González about the dangers of TPP as “a 'one-percenter' power tool that could rip up our basic needs and rights." She also appeared on numerous other TV and radio outlets, including the Viewpoint with Elliot Spitzer on CurrentTV, Let’s Talk About It Radio, Pacifica Radio, CounterSpin, the Dave Sirota Show, the Nicole Sandler Show, Stand UP! With Pete and Dominic, the Bill Press Show, and Sly in the Morning.

The leak has incited extremely significant dialogue, especially in Australia, which according to the leaked document would be the only TPP nation exempt from the Chapter’s provisions on investor-state tribunals.

Providing the public with access to the TPP Investment Chapter is a significant beginning step towards unearthing the secrets of the TPP negotiations and promoting awareness of the powers it bestows upon corporations at the expense of the citizens of America and the eight other TPP nations. (Or eleven, if you include this week's announcements that Canada and Mexico would join the talks.) The more exposure this document receives, the more pressure can be put upon negotiators to live up their promises of transparency.

Thanks to Jed Silver for contributing to this post.

June 18, 2012

Following Last Week’s Damaging Revelations About the Trans-Pacific Partnership (TPP), the Obama Administration Expands Controversial Trade Deal

Following Last Week’s Damaging Revelations About the Trans-Pacific Partnership (TPP), the Obama Administration Expands Controversial Trade Deal 

 WASHINGTON D.C. – That the Obama administration would invite an additional country to join the Trans-Pacific Partnership (TPP) after last week’s leak of secret negotiating documents revealing the proposed pact’s threats is outrageous, Public Citizen said today.

 Last week, after three years of closed-door negotiations, the text of the TPP Investment Chapter leaked, revealing that the Obama administration had agreed to submit the U.S. to the jurisdiction of foreign tribunals where foreign corporations would be empowered to challenge U.S. laws and demand unlimited compensation from the U.S. Treasury.

 The revelation was met with criticism from the political left and right.  However, the U.S. Trade Representative (USTR) refused to comment on the leaked chapter. Increasingly, members of Congress are raising concerns about the pact, including Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee’s Subcommittee on International Trade, Customs, and Global Competitiveness, who has been denied access even to the U.S. proposals to the TPP negotiations.

 Following the growing criticism of the administration’s lack of transparency and the newly revealed substance of the TPP, instead of the administration reconsidering the many TPP provisions that would vastly expand corporate rights and privileges, the administration’s response was to add yet another country into TPP talks: Mexico. Meanwhile, reports out of New Zealand indicate that China also is pursuing entry into this so-called trade deal.

 “The TPP model is fundamentally flawed: It’s hard to imagine who in this country would support it if they knew that it banned ‘Buy American’ procurements, limited Internet freedom a la SOPA (the controversial Stop Online Piracy Act) or created a two-track judicial system privileging corporations with a new ticket to raid our tax dollars,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Adding more countries just expands the potential threats of corporate attacks that the TPP poses to people here and now also poses to Mexicans.”

 “Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade, and in a move that will infuriate left and right alike, have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do,” Wallach said. “U.S. trade officials are secretly limiting Internet freedoms, restricting financial regulation, extending medicine patents and giving corporations a whole host of other powers.”

 Opposition to the TPP is growing. Last month, 69 members of Congress sent a letter to President Barack Obama in response to revelations that TPP actually bans “Buy American” procurement rules.                                                       

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

May 15, 2012

Implementation of Colombia Trade Deal a New Low for Workers and the Environment

It is oddly fitting that U.S. Trade Representative (USTR) Ron Kirk would celebrate today’s implementation of the U.S.-Colombia trade deal at the U.S. Chamber of Commerce. After all, even as the U.S. government’s own projections showed that this pact and a similar one with Korea would increase the U.S. trade deficit, both USTR and the Chamber worked overtime to misrepresent this and other likely impacts.
 
At a time when nearly four out of ten Americans are unemployed or simply not participating in the labor force, it is unconscionable to implement a trade deal with Colombia – the unionist murder capital of the world.  At a time when multinational mining and other extractive industries are displacing poor Colombians, it is unthinkable for this pact to privilege these same corporations with special rights to challenge Colombia’s social and environmental mitigation policies in supranational tribunals. The Colombian government’s own pre-pact assessment anticipated the likely consequence of this deal: rural Colombians “would have no more than three options: migration to the cities or to other countries (especially the United States), working in drug cultivation zones, or affiliating with illegal armed groups.''

The failed North American Free Trade Agreement has virtually identical rules as the Colombia pact, and we know how that worked out: increased job insecurity and more corporate attacks on public interest policies outside of national judicial systems. These rules weren’t a good idea when it came to Mexico: they’re even worse when it comes to Colombia.

In October, President Obama set a new low by pushing a controversial U.S.-Colombia trade deal that attracted the highest level of Democratic opposition to a Democratic president’s trade initiative in history. Instead, record high levels of Republican support were marshaled, only because the Tea Party-supported members of Congress flip-flopped on their campaign commitments by voting for a trade deal that undermines American jobs and sovereignty.

If the administration continues the course on the failed trade policies of the Bush-Clinton-Bush years (as it seems to be with the nine-nation Trans-Pacific Partnership), it can expect continued outrage from people across the political spectrum.

April 27, 2012

Korean Supreme Court urges renegotiation of investor-state clause; expresses concerns of “extreme legal chaos”

An English language Korean newspaper broke some startling news earlier this week. See the full story here.

In 2006, the Supreme Court in Korea submitted an opinion to the government recommending a renegotiation of the investor-state clause, citing concerns that the dispute system could lead to “extreme legal chaos” resulting from increased arbitration requests from U.S. investors.

Five years (and a negotiated trade deal) later, the court’s request has finally been disclosed.

The document warns against problems of sovereignty infringement, extreme investor rights, and legal instability. It also notes that “whether or not to introduce an investor-state dispute system is a decision to be made after the sufficient gathering of opinions from the South Korean public.”
(See here for more on that.) Apparently, one of the bases for their concern was a NAFTA case brought against the U.S., which we detail here.

And according to the article,

The South Korean government announced that it would be renegotiating investment-related provisions in the KORUS FTA with the US within 90 days of its effective date of Mar. 15. It has had a task force working since March on a negotiation draft.

March 21, 2012

Global Trade Watch's Director Lori Wallach in the Huffington Post

Trade Deals: Backdoor Financial Deregulation

Wall Street has a new power tool to demolish financial stability policies, and it comes from a source many would not expect. It's not the cozy relationship between Wall Street and some members of Congress, or the hordes of bankster lobbyists who roam Capitol Hill. Wall Street has obtained and is now pushing for more powers to challenge U.S. and other nations' financial regulations via the international agreements that it has sold to a skeptical American public under the appealing brand of export-expanding "free trade" deals.

In Sunday's New York Times, Gretchen Morgenson described how the financial provisions of the World Trade Organization (WTO) and NAFTA (the North American Free Trade Agreement) operate as backdoor deregulation instruments. Those of us who have studied these so-called "trade deals" understand that these agreements have very little to do with trade per se. Rather, they mainly include new rights for corporations and new constraints on governments' non-trade regulatory policy space.

As my piece in a special edition of the American Prospect shows, instead of following through on President Obama's campaign commitments to fix this backdoor corporate power grab, now the administration is rushing to massively expand this mess by completing a Trans-Pacific Partnership (TPP) deal now being negotiated behind closed doors with eight Pacific Rim nations.

To read the rest of the article click here or go to http://huff.to/GHOXUd

January 19, 2012

NAFTA a way to restart Keystone Pipeline?

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

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

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

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

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

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

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

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

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

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

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

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

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

January 03, 2012

Bankers Trying to Use NAFTA to Kill Financial Reform

Remember the Volcker Rule? Proposed by former Federal Reserve Chairman Paul Volcker and endorsed by five former Secretaries of the Treasury, it aims to prohibit commercial banks from trading stocks, bonds, currency, and derivatives for their own profit. (Customers of banks could still ask their banks to buy and sell these financial instruments if the customers front the cash.) Banks' risky trades played a huge role in the development of the 2008 financial crisis and precipitated the bailout for these overextended banks.

A form of the Volker Rule made it into the Dodd-Frank financial reform bill that became law in 2010, but bankers are trying to cripple the rule as regulatory agencies write the details of how the rule will work. The Investment Industry Association of Canada has raised the possibility of attacking the Volker Rule with NAFTA. In a letter sent to the Federal Reserve last month, the Association claims:

[T]he Volcker Rule will clearly interfere and raise the costs of cross-border dealing in Canadian securities. As a result, the Volcker Rule may contravene the NAFTA trade agreement.

The Investment Industry Association of Canada perfectly illustrates how "trade" agreements can reach inside nations' borders and interfere with public interest regulations that have nothing to do with the flow of goods between countries. Since NAFTA was enacted, bankers have gotten much more aggressive in their attempts to block regulation through trade deals. For example, the Korea FTA, passed by Congress in October, included much worse restrictions on financial sector regulations than NAFTA. On top of that, the General Agreement on Trade in Services of the WTO has its own set of rules that conflict with policies on capital controls, bans on risky financial services, size limits on banks, and “firewalls” between banking and investment services.

Necessary efforts to make our financial system stable like the Volker Rule may continue to run into obstacles unless we have a turnaround in trade policy to protect, rather than restrict, the right of governments to regulate in the public interest.

December 23, 2011

Program to Give Access to NAFTA Trucks Violates the Law

TruckPublic Citizen, the Teamsters, and the Sierra Club filed an opening brief earlier this week on our lawsuit to stop the Obama administration's illegal program to allow unsafe Mexico-domiciled trucks to travel throughout the United States. It's the latest development in the story about how NAFTA may force the United States to lower its highway safety standards by permitting Mexico-domiciled trucks on its roads.

NAFTA included a requirement that all three countries’ highways be fully accessible to trucking companies based in any NAFTA nation by 2000, an item pushed by large U.S. trucking firms seeking deregulation and lower wages. However, the Department of Transportation studies have found that Mexico-domiciled trucks have much worse safety records than U.S. trucks, so public opposition has stymied attempts to open all U.S. highways to these trucks. In 2007, Congress put strict conditions on any pilot program that would evaluate the performance of Mexico-domiciled trucks on U.S. highways.

The Obama administration chose to ignore some of Congress’s conditions when it initiated a pilot program this October. Under the program, Mexico-domiciled trucks entering the United States do not need to show that they are built to U.S. safety standards, nor do drivers of these trucks need to meet all physical standards required of U.S. drivers. Furthermore, the administration did not follow proper procedures when conducting an environmental impact assessment. The program does not even serve its stated purpose of evaluating the ability of Mexico-domiciled trucks to operate safely in the United States, since there is no plan to collect a statistically valid sample of program participants. Finally, Congress insisted that any pilot program achieve comparable access for U.S. trucks in Mexico, but due to the limited availability of certain fuels, the program does not guarantee reciprocal access to Mexico for U.S. trucks.

For more background on NAFTA trucks, visit our landing page on the issue.

(Image courtesy of the Missouri Department of Transportation)

November 10, 2011

Sherrod Brown Tosses the Panama FTA

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

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

November 01, 2011

NAFTA is the One Ring of our Democracy

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

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

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

Krugman chimes in on this point:

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

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

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

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

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

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

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

October 31, 2011

Wallach and Tucker in American Prospect: Parties realign on flawed trade deals

Our own Lori Wallach and Todd Tucker have a piece in the American Prospect today. Here’s a snippet:

++
 
American Prospect logoAs he gears up for a difficult re-election campaign, President Obama risks losing key swing states that he won in 2008 because of a recent flip-flop on trade commitments…
 
Even the government’s own study, produced by the U.S. International Trade Commission (ITC), showed that these pacts would increase U.S. imports by more than exports…
 
Instead of probing such matters, most mainstream press reports over the entire four-plus year debate simply parroted corporate and Obama-administration talking points.

The missed political storyline, too, was equally astounding. Two-thirds of Democratic House members opposed Obama on the Korea pact and 82 percent who opposed him on the Colombia pact. It's his biggest split with House Democrats thus far. The number who voted against the deal is even greater than the percentage of House Dems who opposed the Patriot Act (63 percent) or the war-funding bills (56 percent). And of course, Obama got nothing in return for the capitulation: Republicans advanced the trade pacts while blocking his second stimulus package. So much for negotiation.

It took Bill Clinton nearly eight years of NAFTA job losses, sellouts, and scandals to have about two-thirds of the House Democrats vote against China’s entry into the World Trade Organization in 2000. Obama managed to meet and beat that record with his first trade votes. The percentage of Democratic House votes against these deals even surpassed Democrats’ average level of opposition to Republican presidents’ trade initiatives.

++
 
Click here for the full article.

August 03, 2011

Op-Ed Round-Up

Here's a round-up of some of the best opinion pieces over the last couple of months about the pending trade deals:

 

The Hill masthead

U.S.-Korea trade deal is bad for both countries

By Chun Jung-bae, National Assembly of the Republic of Korea

"There is some rosy fantasy that the pending U.S.-Korea Free Trade Agreement will create tens of thousands of well-paying jobs in both countries and strengthen and expand the U.S. relationship with Korea. This is a fabrication of multinational corporations that have no allegiance to either country. As a member of the Korean National Assembly, I would like to set the record straight: In reality, the deal is lose-lose."

Read the entire piece here.

 

Seattle_times_logo 

Congress should reject proposed trade agreements and insist on better policies

By Lynne Dodson, secretary-treasurer of the Washington State Labor Council, and Kathleen Ridihalgh, senior organizing manager of the Sierra Club in Washington and Oregon.

"The definition of insanity is doing the same thing over and over and expecting a different outcome. This summer, insanity reigns over proposed U.S. trade agreements with South Korea, Colombia and Panama. For more than 20 years, "free" trade agreements have systematically undermined the American economy and the middle class. The growing disparity between the "haves" and "have nots" is turning the American dream into a nightmare. It is a direct result of our failed trade policy, and it needs to stop now."

Read the entire piece here.

 

SacBeeLogo

US-Colombia free trade agreement bad idea for both countries

By John I. Laun and Cecilia Zarate-Laun, Colombia Support Network

"In the coming days, the U.S. Congress will be debating a free trade deal between the United States and Colombia. The agreement, if finalized, will have a negative impact on both countries. It will not lead to job creation in the United States. Instead, it will cost U.S. jobs, as multinationals will relocate to Colombia in order to avoid paying higher wages here. But Colombia will not benefit, either."

Read the entire piece here.

 

HuffPo logo

Trading Our Future: Tax Cheating and the Panama Free Trade Agreement

By Dylan Ratigan, host of MSNBC's "The Dylan Ratigan Show"

"If you want to know why politicians are so eager to pass a free trade agreement with Panama this month, type "Panama offshore banks" into Google and look at the paid ads. What you'll see is advertising by law firms and banks that will offer you help to set up a secret corporate structure in Panama immune from taxes."

Read the entire piece here.

 

Knoxville-news

Free Trade Pacts Will Cost Tennesseans Jobs

By Robert E. Scott, director of trade and manufacturing policy research at the Economic Policy Institute

"Based on past U.S. experience with NAFTA and other trade agreements, I have estimated that the U.S.-Korea and Colombia FTAs will displace 214,000 U.S. jobs. These job losses will fall hardest in industrial states like Tennessee. Workers there would be well-advised to think twice before supporting these job-displacing trade agreements."

Read the entire piece here.

  

MilwaukeeJS logo So-called 'free' trade agreements harm American workers

By Steve Kagen, doctor and former member of Congress from Appleton, Wis.

"Professional politicians in Washington and their partners on Wall Street are lining up for another payday - this time by promoting 'free trade' deals with Korea, Panama and Colombia. But if you're not in Washington or on Wall Street, there's a problem. These new deals are just like the old deals. They are job-killers - just like NAFTA and CAFTA before them."

Read the entire piece here.

 

Bangor_Daily_News_Logo 
 
Say no to new trade deals and start over

Editorial

"If so-called free trade is not done right...the only winners are corporations without borders. The losers are the people who live and work in those developing nations and the American blue-collar workers who see jobs leave the States. ... There is a good reason that both Maine tea party groups and organized labor oppose the South Korea, Panama and Colombia trade agreements. After defeating them, Congress must create a better way to promote global trade."

Read the entire piece here.

 

Detnews_logo

Open borders, trade deals are ruinous for America

By James P. Hoffa, president of the International Brotherhood of Teamsters

"Three more job-killing trade deals are in the hopper, and you can bet the news media will swallow whole the phony claims made about them by the U.S. Chamber of Commerce and other groups. Congress is now considering trade agreements with Colombia, where trade unionists are routinely murdered; Panama, a well-known tax haven; and South Korea, in the biggest trade deal since NAFTA. It seems our trade policy is of the corporation, by the corporation and for the corporation."

Read the entire piece here.

 

Boston_globe

Trade deals are no deal for US

By Steven J. D'Amico, former Mass. state Representative and member of the American Jobs Alliance

"Even after losing 682,000 jobs to NAFTA since it took effect in 1994, and 2.4 million to China since it joined the World Trade Organization, Washington continues in its blind faith that somehow these trade deals are good for us. This summer Congress is expected to take up three new trade deals - with Korea, Panama, and Colombia. These trade pacts are bad for American workers, bad for our domestic economy, and bad for democracy."

Read the entire piece here.

 

Columbus Dispatch 
Free-trade deals would be costly to U.S.

By Tom Burga, president of the Ohio AFL-CIO

"For over a decade, the labor movement and development advocates have called for fair-trade policy that is part of a more coordinated and coherent national economic strategy.  Unfortunately, the Korean, Colombian and Panamanian free-trade deals before Congress do not address the fundamental policy failures of the North American Free Trade Agreement and China's inclusion into "favored nation status," which has led to catastrophic job loss in the U.S. and the explosion of our import/export deficit, now reaching $500 billion annually."

Read the entire piece here.

 

Redding Record Searchlight Trade pacts bad for California agriculture

By Curtis W. Ellis, executive director of the American Jobs Alliance, and Joaquin Contente, president of California Farmers Union 

"Pending free trade agreements with Korea, Colombia and Panama are bad for California farmers and must be rejected if we are to preserve our way of life. All three trade treaties are based on North American Free Trade Agreement-style policies that have displaced American farmers while sending jobs that support California's rural communities offshore. In fact our leading export is jobs and we reward companies that outsource jobs. Since NAFTA took effect, the United States has lost 300,000 farms and millions of jobs."

Read the entire piece here.

 

WisStateJrnl 
Wisconsin Farmers Union opposes free trade pact with Korea

By Darin Von Rudin, president of Wisconsin Farmers Union

"WFU strongly opposes the Korea-U.S. Free Trade Agreement and urges Congress to do the same. We feel our legislative leaders should be protecting and promoting American jobs, family farms and our rural communities through sound economic, environmental and labor policies. We don’t think this trade agreement adequately promotes these values."

Read the entire piece here.

 

Statesman_Journal_logo 
Rep. Schrader is confused on international trade

By Steve Hughes, state director of the Oregon Working Families Party,Ray Kenny, International Brotherhood of Electrical Workers Local, and Frank Rouse, president of the Machinists Union Local 1005

"Congressman Kurt Schrader seems to be confused. On the one hand, he says he opposes trade deals that extend greater rights to foreign investors than exist for Oregonians doing business in our state. On the other hand, he is supporting a massive new free trade agreement with South Korea that does just that."

Read the entire piece here.

 

Minneapolis Star-Tribune logo 
Free trade agreements jolt the economy, but not in a good way

By Jessica Lettween, director of the Minnesota Fair Trade Coalition

"It's easy to understand why multinationals adore the Korea agreement. But with around 7 percent unemployment in Minnesota, a budget crisis, and an electorate that is strongly opposed to more NAFTA-style trade agreements, it is baffling why any member of Congress would endorse a deal that will cost us so much."

Read the entire piece here.

 

The Hill masthead

Choose voters over donors on free trade

By Gordon Lafer, professor at the University of Oregon, former senior adviser to the U.S. House’s Labor Committee

"Like Republicans, the White House is eager to get these treaties done quickly, so that voters will have forgotten by the fall of 2012. To see the Obama administration and Republican leadership quietly collaborating to seal this deal in knowing violation of the voters’ will is among the most telling signs of corporate power in Washington, and among the most depressing stories in these tough times."

Read the entire piece here.

 

Winona Daily News

Obama's trade policy clearly shortsighted

By Karen Hansen-Kuhn, international program director for the Institute for Agriculture and Trade Policy

"More than two years into the Obama administration, we're still waiting for a 21st-century trade policy."

Read the entire piece here.

 

(Disclosure: Public Citizen has no preference among the candidates for public office.)

 

July 11, 2011

White House Rocked by Protests Against Unfair Colombia Trade Deal

Colombia FTA Protest July 11 2011 WH Coffins Signs

Today, hundreds of activists gathered at the White House for a demonstration against the U.S.-Colombia FTA. These representatives of faith, labor, human rights and consumer organizations called for the Obama administration to drop its push to pass the Bush-signed trade pact. Fifty one coffins were laid in front of the White House to symbolize the murders of that number of Colombian unionists last year. Five activists were arrested as an act of civil disobedience, including Rick Chase, Executive Director of the Presbyterian Peace Fellowship.

Click here for more pictures.

Read the press advisory after the break.

Continue reading "White House Rocked by Protests Against Unfair Colombia Trade Deal" »

June 15, 2011

Chamber of Commerce's Misleading Data Website Gives Only Half the Story

Today the Chamber of Commerce launched a website that purports to show the effects of U.S. trade upon jobs in each congressional district, as part of its lobbying campaign to pass the Korea, Colombia, and Panama Free Trade Agreements (FTAs).  Even a cursory review shows that the data included to represent “effects of trade” is only gross exports – imports are excluded, as are net figures that show the actual impact of trade on the districts. 

Indeed, the Chamber’s “new” website just repackages the previously-released old exports-only data featured in past Chamber “studies” of the FTAs. It’s the same misleading approach - like only counting deposits into ones bank account, not also withdrawals or the ending balance.

And, this is especially deceptive because it operates to cover up the huge U.S. trade deficit, which has been driven to astronomical levels by the very same NAFTA-style trade pacts supported by the Chamber of Commerce and the American jobs lost from years of large annual trade deficits.

When economists study the jobs impact of  trade pacts, they consider both sides of the ledger by estimating the number of jobs supported by exports as well as the number of jobs displaced by imports. As Nobelist Paul Krugman noted: " If you want a trade policy that helps employment, it has to be a policy that induces other countries to run bigger deficits or smaller surpluses. A countervailing duty on Chinese exports would be job-creating; a deal with South Korea, not…"

Studies that review both imports and exports explain why broad majorities of Americans are against the types of trade pacts the Chamber continues to promote. For instance, the Economic Policy Institute found that 5.6 million more jobs were displaced by imports than were supported by exports in 2007. Looking into the future, the Economic Policy Institute has estimated that implementation of the Korea and Colombia FTAs alone will lead to a net loss of 214,000 U.S. jobs due to rising trade deficits.

Exports support jobs, but the NAFTA-style trade pacts touted by the Chamber will lead to greater imports than exports, displacing workers in the United States. Says who? Well, among others, the Korea FTA’s lead negotiator Ambassador Karan Bhatia who was Pesident George W. Bush’s deputy U.S. trade representative. In an October 2006 speech to a Korean audience, Bhatia said that it was a “myth” that “the U.S. will get the bulk of the benefits of the FTA.” He went on to say, “If history is any judge, it may well not turn out to be true that the U.S. will get the bulk of the benefits, if measured by increased exports.” He added that, in the instance of Mexico and other countries, “the history of our FTAs is that bilateral trade surpluses of our trading partners go up,” meaning that the U.S. trade deficit with those countries increased. 

Even on its own terms, the Chamber website’s estimates of the number of jobs supported by exports in each congressional district are often double counted and misleading. According to the website’s own methodological summary, if any part of a county intersects with a congressional district, all of that county's exports and extrapolated “jobs-supported” are added to that  district's total. This leads to a huge degree of double-counting, since exports from a single county are often assigned to multiple congressional districts. In Texas alone, the sum of the number of jobs supported by exports in each congressional district is 250 percent greater than the state total given by the Chamber, meaning that the jobs estimate for the average Texas congressional district is inflated by 250 percent. Thus, users of the website are misled when they think they are accessing the number of jobs supported by exports in their congressional districts.

Public Citizen has estimated the number of jobs in each congressional district in sectors that will be hit particularly hard by the Korea FTA. A searchable database of these estimates is available at:
http://www.citizen.org/korea_fta_jobs_at_risk

June 14, 2011

FTA Investors Rules Not Fixed by Preamble Change from 2007

As EOT regulars know, NAFTA-style trade deals contain investment rules that allow corporations to bypass national legal systems and launch attacks on governments in international tribunals. The basis for these attacks can be as simple as institution of a new environmental policy that affects the corporation’s expected future profits. Judges for these so-called “investor-state” cases are selected in part by the corporation, and the trade-pact rules are tailored to corporate demands. Often the mere threat of one of these investor-state awards can cast a chill on public-interest regulation.  All told, more than $350 million has been paid to date in these cases.  Moreover, there are over $9.1 billion in claims in the 13 investor-state cases outstanding under NAFTA-style deals, relating to environmental, public health, and transportation policy.  An additional $483 million has been awarded under U.S. Bilateral Investment Treaties (BITs), which contain similar investment rules. Billions of dollars are also pending in BIT cases now underway.

The Panama, Colombia and Korea “free trade agreements” (FTA) may be considered by Congress in the near future. These pacts constain investment rules that are almost identical to those in NAFTA, except where they are worse. There was one investment-related addition made to the preambles of these FTAs as part of a May 10, 2007 deal with the Bush administration. It stated that the parties: “AGREE that foreign investors are not hereby accorded greater substantive rights with respect to investment protections than domestic investors under domestic law where, as in the United States, protections of investor rights under domestic law equal or exceed those set forth in this Agreement.…”

Some have suggested that this provision goes all or most of the way towards resolving the concerns with these provisions. This is not the case. There is no certainty as to the legal meaning of the May 2007 preambular provision.

Public Citizen has just published a memo that examines six different approaches to preambular language, including the four that have been taken by the tribunals under the 45 final awards issued under U.S. FTAs and BITs.

The memo finds the May 2007 preambular modification fails to address the main concerns raised by scholars and members of Congress with regard to the investment provisions. Indeed, there is scant historical support for the notion that pro-public interest provisions of preambles are protective of regulatory prerogatives: nearly 90 percent of the time, tribunals have given them no weight at all. The remainder of the time,tribunals found that pro-public interest provisions had to be balanced against, and possibly watered down by, pro-investor provisions.

Deeper changes will be required to the investment provisions of the proposed FTAs with Korea, Panama and Colombia, as well as a Trans-Pacific FTA (which includes Peru, the U.S. and eight other countries) now under negotiation. 

To read the memo, go here.

May 25, 2011

Trade Looms Large in NY Special Election

(Disclaimer: Public Citizen has no preference among candidates for office)

Yesterday Democrat Kathy Hochul pulled off an upset win against Republican Jane Corwin in the special election for New York's 26th District, wresting control of a seat the GOP has occupied since the 1960's. Much attention has focused on the candidates' positions on Medicare as a deciding factor in the race, but trade policy also played a key role in the election.

Jack Davis, independent candidate and president of a local manufacturing company, turned the spotlight on the devastating consequences of unfair trade policies for American manufacturing workers. His focus on offshoring garnered nine percent of the votes in the special election.

Earlier in the race, Davis was polling at 23 percent, a testament to the power of trade as an election issue.  Eager to be on the right side of the trade issue, Kathy Hochul released a strongly-worded statement condemning NAFTA and opposing the Korea, Panama, and Colombia FTAs.

For her part, Corwin ran an ad claiming that she would "oppose trade agreements that just aren’t fair", but never followed through in naming a specific pact that she would oppose. When asked point-blank in a questionnaire if she supported NAFTA and the Korea, Panama, and Colombia FTAs, she refused to take a position.  The tension between Corwin's vague fair trade statements and her reluctance to oppose specific policies came to a head when Hochul and Corwin addressed Davis' absence from the May 12th debate:


Oddly, Hochul and Corwin both ended up noting Davis’ absence from the debate not to needle him, but each other.

Hochul started it, saying she wished Davis had participated because “he brings a lot to the debate,” and on his behalf demanded Corwin state her view of the North American Free Trade Agreement and unfair trade. That’s been Davis’ signature issue in all four of his congressional campaigns.

Corwin’s answer: “Right back at’cha, Kathy. There are a lot of things that Jack could ask Kathy Hochul. I think we need to get clarification on her plan for Medicare. She talks about holding the line on taxes. How do you hold the line on taxes when you’re advocating ... to raise taxes?”


That exchange sharply contrasted the difference between Hochul's commitment to oppose specific trade agreements and Corwin's broad statements on fair trade. A large number of the new GOP House freshmen campaigned on supporting fair trade. With Hochul's solid win over Corwin, they're on notice that they will have to put their money where their mouths are on the upcoming votes on the Korea, Panama, and Colombia FTAs or face voter anger in November 2012.

May 12, 2011

Trade Deficit with FTA Countries Continues to Climb

Yesterday the Census Bureau released the March trade flow numbers, revealing that our trade deficit continues to worsen. The U.S. trade deficit rose by $2.8 billion, or 6.2 percent, between February and March on a seasonally-adjusted basis.

With Congress on the verge of considering another set of trade agreements based on the NAFTA model, digging into the data of this new release could help illustrate whether existing NAFTA-style trade agreements are aiding or hindering the fight to keep the trade deficit under control.

The most recent trade data shows that the deficit with our 17 FTA partners continues to worsen, adding to the body of evidence that NAFTA-style trade agreements are hurting American workers. Between February and March, the U.S. trade deficit with U.S. FTA partners grew by $1.6 billion, or 12.3 percent. News reports on the trade deficit noted that the dramatic rise in the price of oil in March accounted for much of the widening of the overall trade deficit. Do oil imports explain the rise in the trade deficit with our FTA partners? No, the jump in the trade deficit with U.S. FTA partners is still huge when you take out oil to account for the jump oil prices. With oil excluded, the trade deficit with FTA partners increased by $846.9 million, or 13.9 percent, between February and March. The non-oil trade deficit with countries that are not FTA partners grew by only 6.8 percent over February-March, less than half the pace of the growth in the deficit with FTA partners.

The latest trade numbers are a sign that the trade deficit is acting as a brake on the momentum of the economic recovery. Given that trade with our current FTA partners act as a primary force in that brake, it is time for the Obama administration to rethink the Korea, Panama, and Colombia FTAs and chart a path away from the old trade model that leads to skyrocketing deficits.

May 09, 2011

New Estimate of NAFTA Jobs Impact Warns Against Korea FTA

Rob Scott at the Economic Policy Institute has released a new study estimating 683,900 U.S. jobs have been displaced due to the rise in the trade deficit with Mexico after NAFTA was enacted. It serves as a grim warning of what could come if Congress were to approve the Korea FTA, which is based on the NAFTA model. Scott breaks down the job displacement by industry and congressional district, illustrating how workers across the country have been harmed as the deficit with Mexico skyrockets.

As Scott notes, corporate lobbyists and administration officials pushing the Korea FTA today sound just like pro-NAFTA government officials back in the early 1990's before NAFTA devastated U.S. manufacturing jobs. Once again they are claiming that a NAFTA-style trade agreement will create thousands of jobs, but this new study is a wakeup call to anyone who views their claims as believable.

Scott highlights the fact that the industrial structure of U.S. trade with Mexico and South Korea are very similar, which portends NAFTA-like job loss if the Korea FTA were to be implemented. The U.S. has huge trade deficits in electronics and motor vehicles and parts with both Mexico and South Korea, and the U.S. International Trade Commission predicts that the U.S. trade deficit in these products will dramatically increase if the Korea FTA were to enter into force.

Daniel Griswold over at the Cato Institute challenged the results of the study, claiming that the study's method of computing job losses is flawed. Proponents of unfair trade may rail against the methodology that Scott employs now, but what did they think of it when they were trying to prove that NAFTA would be a boon for workers before it passed? They embraced it. Gary Hufbauer and Jeffrey Schott, leading NAFTA proponents at the Institute for International Economics, released a study in 1993 predicting that the annual U.S. trade balance with Mexico would improve by $9 billion due to NAFTA, leading to a net increase of 171,000 U.S. jobs. To estimate the increase in the number of jobs, they used same method as Rob Scott used in his latest NAFTA study and applied it to their prediction of the change in trade flows after NAFTA, although their study did not break down jobs geographically.* Perhaps FTA proponents have changed their minds about the method merely because it now reveals all those claims about NAFTA job gains went up in smoke after NAFTA was actually enacted.

Griswold then goes on to belittle the magnitude of the job displacement estimated by the study, comparing it to the 15 million jobs that are created and destroyed annually. It's a silly comparison, because the 15 million figure deals with turnover, whereas Scott's study deals with the changes in the total number of jobs displaced by trade with Mexico at two different points in time, i.e. the net change after all the turnover has completed. 683,900 jobs is a lot of jobs, especially to those workers who have seen their jobs offshored due to unfair trade policy.

*The only significant difference between the studies is that Hufbauer and Schott used estimates from a 1992 Department of Commerce study of the number of jobs supported in each industry by each export commodity to Mexico, for which there is no similar recent data. Scott used data from the Bureau of Labor Statistics on the jobs supported by a given quantity of goods produced in the United States by industry, which gives results similar to the Department of Commerce data.

April 27, 2011

Todd Tucker in Foreign Policy magazine: "Obama has swapped smart policy for the same-old job-crushing trade deals."

Check out Todd Tucker's piece in Foreign Policy magazine.

 

ForeignPolicyLogo1 

A Bad Trade

Obama has swapped smart policy for the same-old job-crushing trade deals.

"When Barack Obama was elected back in 2008, he committed to breaking with the same flawed trade policy the United States has followed for a generation. Obama promised a new page, one that focused on creating American jobs and protecting the environment. Instead, his administration has flip-flopped on these campaign promises and is now pushing free trade agreements (FTAs) that are projected to cost American jobs, undermine U.S. negotiating credibility, and could even dampen the president's electoral prospects in 2012. ..."

Read the entire piece here.

April 15, 2011

USDA's FTA Report Repeats Errors of Previous Flawed Studies

Earlier this week, the USDA released a report attempting to estimate the effects of the Korea, Colombia, and Panama FTAs upon U.S. agricultural trade. It also examined possible effects of the ASEAN-China and ASEAN-Australia-New Zealand FTAs upon the U.S.

Unfortunately, the USDA estimated the effects through a computable general equilibrium (CGE) model, which has a shoddy track record, to say the least. A 1999 U.S. International Trade Commission (USITC) study on the likely effects of China’s tariff offer for WTO accession used a CGE model to estimate that the U.S. trade deficit with China would increase by only $1 billion dollars due to China’s accession. In reality, the trade deficit with China skyrocketed by $167 billion between 2001 and 2008.

Similar studies on NAFTA were also way off the mark. An economist at the Federal Reserve concluded that a CGE-based study of NAFTA underestimated NAFTA’s impact upon U.S. imports by ten times the actual effect of NAFTA. He concluded his study with a recommendation: “If a modeling approach is not capable of reproducing what has happened, we should discard it.”

Not accounting for currency manipulation is a chief problem of CGE models, as Rob Scott at the Economic Policy Institute has demonstrated. The USDA's report even acknowledges the devastating effect currency devaluation can have upon U.S. agricultural exports:

In 1997, U.S. apple exports to Southeast Asia peaked at 150,000 tons, just as the Asian financial crisis struck. The crisis led to sharp devaluations of Southeast Asian currencies that raised the prices of imported apples and income losses that further discouraged apple buying, triggering a dramatic decrease in U.S. apple exports to the region.

As we discuss in a factsheet, Korea is only one of three countries to have ever been placed on the Treasury Department’s list of currency manipulators, having repeatedly manipulated its currency in the past. The Korea FTA contains no prohibition against currency manipulation, so the Korean government could effectively negate the tariff cuts mandated under the FTA through currency manipulation. Despite the long history of Korea manipulating its currency, the USDA’s estimates do not attempt to account for the very real possibility of another devaluation, even though they could have done so through estimating alternative scenarios.

Continue reading "USDA's FTA Report Repeats Errors of Previous Flawed Studies" »

April 08, 2011

HI State Rep Takumi Says No More NAFTAs!

Check out this op-ed written by Hawaii State Rep. Roy Takumi (D-Pearl City, Palisades) in theTakumi Honolulu Star Advertiser today. Takumi, who has served in the Hawaii State Legislature for over 19 years, is leery of more NAFTA-style agreements.

I began serving in the state House 19 years ago, shortly before NAFTA was implemented. Since NAFTA and a batch of NAFTA-style deals with other countries, we've suffered an exploding trade deficit, the loss of more than five million manufacturing jobs, and stagnation of real median wages for American workers  at 1970s levels. Meanwhile, we have been flooded with unsafe imported food and goods, and foreign investors have used NAFTA to challenge important state environmental laws before foreign tribunals.

Further, Takumi takes on some of the rosy promises Korea FTA supporters are making to Hawaii's agricultural producers.

The reality is that even with zero Korean tariffs, most of Hawaii's agricultural products cannot come close to the low prices for which these products are sold to Korea by others. For example, Indian banana and papaya farmers sell their crop at one-fourth to one-third the price local farmers require. Peruvian farmers sell guava at $173 per metric ton; our price is $346. Farmers in Thailand, the largest pineapple producer, sell their pineapples at $120 per metric ton compared to $458 locally. How do we compete in this market?

Takumi, who has led efforts to improve trade agreements for several years - including sponsoring legislation that was enacted in 2007 to give the Hawaii legislature a formal role in determining some of Hawaii's commitments to trade agreements - is among many state officials who are critical of the undemocratic NAFTA-style model.

Just a few weeks ago, New Jersey State Senator Shirley Turner (D-Trenton) introduced a resolution supporting a New Jersey Constitutional amendment requiring that the New Jersey legislature give approval before New Jersey may be committed to certain aspects of international trade agreements. This resolution comes on the heels legislation passed by wide margins in the New Jersey legislature last session which was vetoed by the outgoing governor, John Corzine. If Turner's resolution passes, the proposed amendment will go to the ballot this fall.

April 04, 2011

The Korea FTA: Putting Corporations Before the Public Interest

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

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

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

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

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

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

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

March 16, 2011

Gingrich lauds loss of jobs to Mexico

As Alex Seitz-Wald at Think Progress reports, possible Republican presidential candidate Newt Gingrich is saying NAFTA worked because it created jobs in Mexico. On a call in show, Gingrich said:

    CALLER: Back in the ’90s I remember Ross Perot saying that there was going to be the giant sucking sound of jobs if NAFTA passed. I think it ended up being true, right? And I know you were a big free trader.

    GINGRICH: Yeah, well, I don’t think it was true in Mexico. I think the fact is that NAFTA allowed us to build jobs in Canada, the United States, and Mexico, in competition with China. I mean, our big competitor is not Mexico. Our big competitor is China and India. And I’d rather have jobs close to the United States than have jobs overseas in places like China and India. That’s why I was in favor of it. … So in a sense, I’d like our neighborhood to be fairly well off and fairly prosperous.

I doubt too many fair trade Tea Party folk will rally behind a guy who shows so little concerns for "Making it in America."

Moreover, as EOT readers know, it's false that NAFTA has somehow benefited Mexico at the expense of the United States: it has been lose-lose for working people in both nations.

Today's revelation that the Pentagon is flying drones over Mexico to track down narcotraffickers is just the latest revelation that NAFTA prioritized the corporate bottomline at the expense of sustainable, non-drug related job creation.

(Disclosure: Public Citizen has no preference among the candidates for public office.)

March 11, 2011

Domestic courts must defer to NAFTA courts?

Yesterday, I wrote that there were some additional aspects of the Cargill v. Mexico award under NAFTA that were notable that I hadn't covered in my original post last week.

Another dimension of the Cargill v. Mexico arbitration worth mentioning is that Mexico lauched a case in Canadian courts to have the NAFTA award set aside, on the grounds that the ICSID panel erred and exceeded its jurisdiction. Mexico argued that it should only have to compensate Cargill for the damages it suffered in Mexico proper, not for the loss of revenue to the U.S. parent company as a result of not being able to export HFCS to Mexico.

The Ontario court refused to set aside or reduce the damages, and stated that national courts must show a high degree of deference to NAFTA investor-state awards. There were several quotes from U.S. and Canadian courts related to international arbitration that I had not seen before, but which were surprisingly blunt.  See this quote from Supreme Court Justice Blackmun from the Mitsubishi v. Chrysler case:

"As international trade has expanded in recent decades, so too has the use of international arbitration to resolve disputes arising in the course of that trade. The controversies that international arbitral institutions are called upon to resolve have increased in diversity as well as in complexity. Yet the potential of these tribunals for efficient disposition of legal disagreements arising from commercial relations has not yet been tested. If they are to take a central place in the international legal order, national courts will need to 'shake off the old judicial hostility to arbitration.'... and also their customary and understandable unwillingness to cede jurisdiction of a claim arising under domestic law to a foreign or transnational tribunal. To this extent at least, it will be necessary for national courts to subordinate domestic notions of arbitrability to the international policy favoring commercial arbitration..."

The Ontario court also favorably cited an argument from the Mexico v. Feldman Karpa case under NAFTA that  "the dispute settlement mechanism and the need for expertise, all combine to indicate that the statutory purpose is to take resolution of these disputes out of the hands of domestic courts..." (This argument was made by counsel for Feldman in Mexico's request to have the NAFTA arbitration set aside in Ontario courts in 2005.)

The Blackmun quote has been primarily invoked in U.S. courts with reference to private commercial arbitration, not investor-state cases that relate to public law. However, that has changed in the last year. On March 16, 2010, the U.S. District Court Southern District of New York wrote inthe Ecuador v. Chevron case that,

Chevron and Texaco (hereinafter referred to as “Chevron”), have commenced an arbitration proceeding before a tribunal pursuant to the Bilateral  Investment  Treaty  between the United States and Ecuador...

Numerous cases have held that there is a strong presumption in favor of arbitration. See, e.g., Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogenerational Int'l, Inc., 198 F.3d 88, 92 (2d Cir.1999). We believe that this is particularly true where the arbitration is pursuant to an international treaty, here a treaty between Ecuador and the United States. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (Federal policy favoring arbitration “applies with special force in the field of international commerce.”). The explicitly stated purposes of the treaty were to encourage investment by Americans in Ecuador and Ecuadorians in the United States by assuring investors that an independent, neutral tribunal exists to arbitrate claims such as the claim here that Ecuador is seeking to impose liability unlawfully. See Treaty Between The United States of America and The Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of Investment, U.S.-Ecuador, Aug. 27, 1993, S. Treaty Doc. No. 103-15. It is Chevron's claim that this is what Ecuador is now in the process of doing. Thus, a motion to stay here strikes at the core purposes of the treaty between Ecuador and the United States...

Ecuador's motion for summary judgment and motion for a preliminary injunction are denied. The Yaiguaje Plaintiffs' motion for summary judgment is denied. Chevron's motions to dismiss Ecuador's petition and the Yaiguaje Plaintiffs' petition are granted.

Finally, the same court made a virtually identical conclusion citing the Blackmun language on Jan. 21, 2011, in Argentina's application to vacate an arbitral award under the UK-Argentina BIT. Argentina made the argument that U.S. courts should not side with the British investor BG Group PLC because...

Argentina argues that the arbitral panel should have appraised the value of BG Group's investment on “the day before the [emergency] measures” were taken, Tr. 17:7, Sept. 28, 2010, when the Argentine economy had already collapsed, Pet'r's 3d Supp. Mem. at 18, instead of assessing “the value of BG [Group's] stake in MetroGAS in 1998 .... when the Argentine economy was at its peak,” id. at 18, by relying on the July 12, 1998 transaction involving the sale of Gas Argentino, S.A. shares, Award ¶ 441. Argentina asserts that the arbitral panel's valuation of BG Group's investment resulted in Argentina being “held responsible ... for the effects of the economic crisis it suffered between 1998 and 2001,” and thus the arbitral panel's ruling conflicts with both the principle that “[a]ctual pecuniary loss sustained as a direct result of the wrong is the measure to be applied in fixing damages,” Pet'r's 3d Supp. at 22 (citing Ainger v. Michigan General Corp., 476 F.Supp. 1209, 1233 (S.D.N.Y.1979)),15 as well as the Fifth Amendment's guarantee of entitlement to only “just compensation” for the taking of property, see Tr. 15:21-25, Sept, 28, 2010 (asserting that “the guiding principle of just compensation and the [T]akings [C]lause of the Fifth Amendment is that the owner of the condemned property must be made whole[,] but is entitled to no more”). These arguments are without merit...

To the extent Argentina is asserting that the arbitral panel's issuance of the Award itself violates the Takings Clause and contravenes the public policy of the United States, that position is also without merit. Of course, the arbitral panel is not an arm of any government, and thus any decision rendered by it could not constitute a “government taking.” But even assuming that the arbitral panel, as a quasi-judicial body, see, e.g., Portland Gen. Elec. Co. v. U.S. Bank Trust Nat'l Assoc., 218 F.3d 1085, 1090 (9th Cir.2000) (observing that an “arbitrator plays a quasi-judicial role” in conducting an arbitration), could be viewed as a governmental entity, the Supreme Court noted in Stop the Beach Renourishment, Inc. v. Florida Dep't of Environmental Protection, ---U.S. ----, ----, 130 S.Ct. 2592, 2604, 177 L.Ed.2d 184 (2010), that no clear standard exists for what constitutes a “judicial taking, or indeed whether such a thing as a judicial taking even exists.” It cannot be said, therefore, that the arbitral panel's issuance of the Award was an act that “violate[d] some explicit public policy that is well defined and dominant.” Banco de Seguros Del Estado, 344 F.3d at 264 (quoting United Paperworkers Int'l Union, 484 U.S. at 43) (emphasis added). Accordingly, if Argentina's position is that the issuance of the Award itself offends the Takings Clause and precludes confirmation of the Award, that argument also fails.

This ruling comes pretty close to examining the compatibility of international investment law obligations with U.S. constitutional norms. My blood started racing a bit as I read this. But the court veered away from anything very conclusive because of the muddled way in which Argentina raised the takings defense.

Folks waiting for a serious U.S. judicial look at whether and how well FTA/BIT indirect expropriation obligations match up with regulatory takings clauses must wait for another day.

March 10, 2011

Wanna maximize NAFTA Claims? Create as few jobs as possible.

In my long post on the Cargill v. Mexico investor-state claim under NAFTA that was published last week, there were a couple of dimensions that I did not delve into, but which merit mention.

First, Cargill was able to get a much bigger damages award ($77.3 million) than its competitors Archer Daniels Midland (ADM, $33.5 million) or Corn Products International (CPI, $58.38 million).

There are a lot of similarities between the three. All three are U.S.-registered firms that sell high fructose corn syrup (HFCS) in the Mexican market. All three brought NAFTA claims against the same Mexican policy - the special excise tax on soda drinks that contain HFCS.

The main difference was that ADM and CPI actually went to the trouble to build HFCS facilities in Mexico, thus creating jobs in Mexico. Cargill thought about creating a facility in Mexico, but instead decided to process the HFCS in the United States and ship it to Mexico, thus creating only distribution-related jobs in Mexico, but not substantial manufacturing jobs.

Why does this matter? Well, the much reviled Mexican soda tax was motivated by Mexico's desperate attempts to salvage jobs as the country's rural sector got hammered post-NAFTA. CPI and ADM, who helped moderate the job destruction (by a tiny bit), were not able to claim as much in damages as Cargill, who moderated the job loss even less. Simon Lester over at IELP quotes the relevant reasoning, which relates to whether so-called "up-stream losses" should be counted among the damages in a NAFTA investor-state case.

March 02, 2011

Cola Wars Beat Drug Wars

The award in agribusiness giant Cargill's NAFTA investor-state attack on Mexico's jobs program was published last week.

The short version: a tribunal of three unelected judges determined that Mexico's efforts to save or create jobs for campesinos in the sugar sector were a violation of NAFTA. Mexico's taxpayers were ordered to cough up over $77 million plus interest, all the judges' and court fees, and to even pay Cargill $2 million for Cargill's own lawyers' costs.

Here's the longer version:

For years, large agribusiness groups have been pushing the use of high fructose corn syrup in soda drinks, despite concerns about the environmental and public health impact. Not only is HFCS opposed on health grounds, it's also opposed by some foodies on taste grounds: witness the growing demand for Mexican Coca Cola, much of which is made with sugar and is said to therefore taste better.

By the late 1990s, Mexico had a whole lot of excess sugar in its market that it hoped to be able to export to the U.S.This pile-up was driving down prices and hurting Mexico's farmers, who were generally getting battered by NAFTA-style rules and in turn driving displacement into drug trafficking or immigration, as President Obama himself noted during the campaign.

Continue reading "Cola Wars Beat Drug Wars" »

February 22, 2011

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

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

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

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

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

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

December 14, 2010

Bombshell Australian Report Finds FTAs "Oversold"

Productivity commission image for blog Yesterday, the Australian Government's Productivity Commission released a 400-page report examining the effects of Australia's "Free Trade" Agreements (FTAs). The Productivity Commission is the Australian Government’s independent research and advisory body on economic and social issues. The Age reports:

The Productivity Commission has told the government there is little evidence to suggest Australia's six free-trade agreements have produced ''substantial commercial benefits''....

Copyright provisions inserted in the US-Australia Free Trade Agreement could eventually cost Australia as much as $88 million per year....

The report also rails against investor-state lawsuit provisions like NAFTA's Chapter 11 that allow foreign corporations to sue sovereign governments for taxpayer compensation when governments take necessary action to protect the health and safety of their citizens: "There does not appear to be an underlying economic problem that necessitates the inclusion of ISDS [Investor-State Dispute Settlement] provisions within agreements.....Experience in other countries demonstrates that there are considerable policy and financial risks arising from ISDS provisions." The report goes on to note that millions of dollars of taxpayer funds has been paid out to multinational corporations due to corporate lawsuits filed under NAFTA's investor-state dispute settlement provisions. 

The report recommends that the Australian government "seek to avoid the inclusion of investor-state dispute settlement provisions in [FTAs] that grant foreign investors in Australia substantive or procedural rights greater than those enjoyed by Australian investors."  Australia excluded investor-state lawsuit provisions from the U.S.-Australia FTA due to justified fears that foreign corporations would demand compensation if environmental or public interest laws reduced their "expected profits."  The Australian trade negotiators would be wise to heed the well-reasoned recommendations of the Productivity Commission and ensure that investor-state lawsuit provisions are excluded from the proposed Trans-Pacific Partnership.
 
The report notes that the totality of evidence on FTAs "suggest that the economic value of Australia’s [FTAs] has been oversold." That sounds familiar. Oh, that's right, Public Citizen found that the same was true for U.S. FTAs in our September report, "Lies, Damn Lies, and Export Statistics: How Corporate Lobbyists Distort the Record of Flawed Trade Deals," in which we revealed that U.S. exports to FTA partners have grown at half the pace of U.S. exports to the rest of the world. There seems to be a consensus developing here.

November 09, 2010

New Poll Shows GOP Voters Oppose NAFTA-Style FTAs

A new Pew poll released today found that antipathy towards “free trade” agreements and the WTO is particularly intense among Republicans and Tea Party supporters. This finding reinforces the results of previous polls that popular concern for the direction of our trade policy is spreading far beyond just Democrats.

Republicans in the survey were more almost twice as likely to believe that “free trade agreements” (FTAs) like NAFTA and the policies of the WTO harm rather than help the United States (by a 54 to 28 percent margin). This opposition is more intense than that of the public overall, more of whom still believe the U.S. is hurt by such unfair trade deals (by a 44 to 35 percent margin).

Republicans who agree with the Tea Party (think of those who had more enthusiasm to show up at the election booth last week) viewed FTAs even more unfavorably: 63 percent of them thought that FTAs and the WTO were bad for the United States, in contrast to only 24 percent who have a favorable view.

More independents also believe that these trade deals have hurt rather than helped the U.S.

If the Obama administration thought that it would be easy to pass a Korea FTA through a Republican Congress, these new poll numbers prove that it is mistaken. The Republican and Tea Party voters who elected the new Republican majority in the House are deeply opposed to more NAFTA-style FTAs, and the new members of Congress will find it dangerous to cast votes on FTAs against their constituencies. 

The poll also found that 55 percent of Americans think that FTAs have lead to job loss, while only 8 percent think that they have created jobs. This gap is even wider among Republicans and Independents. President Obama has said that his number one priority is job creation. If he is trying to convince Americans that he has his priorities straight, the last thing he should do is pass another NAFTA-style FTA, since most Americans believe that these FTAs are job killers. 

What Obama must do is follow through on his presidential campaign commitments and reform the Korea FTA, including deep changes to the labor rights, investor-state enforcement, and financial services regulation provisions of the FTA. If his administration thinks it can make some cosmetic changes and get it approved by Congress, it is in for a rude awakening.

October 29, 2010

Nationwide, candidates attack jobs and tax dollars going overseas, but why?

Check out this AlterNet piece by Lori Wallach and Todd Tucker to find out.

AlterNet logo 
"This election season, hundreds of candidates across the country are campaigning on their opposition to jobs and tax dollars going overseas. This makes sense, given poll returns that show opposition to unfair trade practices is one of the few things that unite Americans of different incomes and political parties. But many of the politicians’ 30-second television ads do not explain why this offshoring is happening..."

Read the entire piece here.

October 27, 2010

Follow the Climate Reality Tour!

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

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

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

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

Continue reading "Follow the Climate Reality Tour!" »

October 08, 2010

Find Layoffs Caused by Outsourcing and Imports

The Trade Data Center that we launched last week contains so many data products that they can almost be lost in a blur. Right now I’d like to take some time to zoom in and profile the most exciting new data product – the overhauled Trade Adjustment Assistance (TAA) database. The TAA database, available here, tracks specific layoffs that have occurred due to rising imports or outsourcing, as certified by the Department of Labor.

Some readers may be familiar with the TAA database that Public Citizen has maintained for years.  Our new database is an overhauled version of this.  Whereas the previous database only gave the workplace location in the form of the city and state, you can search the new database by congressional district, county, and metropolitan area!  It also gives information about the foreign country implicated in many of the layoffs.

Plus, the new database consolidates the databases of the regular TAA program and the NAFTA-TAA program, which operated between 1994 and 2002, so we can be sure of exactly how many jobs were lost due to imports or outsourcing in a given locality.  Take a look at the FAQ on the database or the technical documentation for more information on these topics.

I’ll give a few examples of how to use the database.

Last month, the corporate members of the President’s Export Council released a letter advocating for the passage of the Bush-negotiated Korea, Panama, and Colombia Free Trade Agreements (FTAs), claiming that passage would boost exports. They ignored the fact that the growth of exports to FTA partners has lagged behind exports to other countries, as we showed in our recent report.  It is possible that these corporations are pushing for FTAs since it would facilitate the export of American jobs rather than American goods. We can investigate this with the help of the TAA database.

Let’s pick Xerox, one of the corporate members of the President’s Export Council. First, we enter “Xerox” into the “Company” search box.

TAA Xerox company

Uncheck the “Denied Petitions” box under the “Cause” option so that the search results include only layoffs that have been certified by the Department of Labor as occurring due to offshoring or rising imports.

TAA Xerox pet denied

Then click “Search”

TAA Xerox results

The first result is a Xerox copier factory in Webster, NY that laid off 450 workers when it outsourced work to Mexico in 2000.  In total, 1613 Xerox workers have been certified under the TAA program.  Does Xerox support FTAs because it thinks that it can export more products with FTAs or is it chomping at the bit to outsource more jobs, which the FTAs would facilitate?

You can query the database for all trade-impacted workplaces in a certain geographic area, such as congressional district. 

Simply select the state and input the desired district number – with a leading zero if it is a single digit – and it will pull up all the workplaces in that district. Make sure to uncheck the “Denied Petitions” checkbox if you only want the certified workplaces. Let’s pick Connecticut’s 5th district.

TAA CT-05 input

There are 79 certifications covering 6,021 laid off workers. Rep. Chris Murphy, who represents Connecticut’s 5th district, should carefully consider becoming a cosponsor of the TRADE Act since unfair trade has been so harmful to his constituents.

Finally, don’t forget to check out our Google map that displays the location of all of the TAA-certified workplaces and gives information about each. Double click a part of the map to zoom into your town and explore how unfair trade has impacted your community.

September 03, 2010

Not enough canola to remove the bitter NAFTA taste

Seemingly from the annals of fake corporate names like Globochem and Brawndo, a company named Chemtura recently was ruled against in a NAFTA investor-state case brought against Canada.

Their claims? That Canada had failed to accord "fair and equitable treatment" to - and had indirectly expropriated - their investment. A panel convened under UNCITRAL sided against Chemtura.

But before we crack open the champagne...

  1. Chemtura's case was undermined by several revealing internal documents that may not be available in other cases, Part I. Chemtura (and its predecessor companies) are in the business of marketing pesticides to canola seed growers (among many other things). In the Canadian market, they had used lindane, a chemical thought to contribute to cancer and restricted in the U.S. and in many other countries around the world. Chemtura was also involved in marketing alternative chemicals to lindane in the U.S. market. In 1997, a Chemtura subsidiary got wind of lindane-treated canola seed coming into the U.S. from Canada, and contacted the U.S. EPA to put the smack down on the practice. The EPA did take some actions, which snowballed eventually into Canada reconsidering whether it shouldn't also ban or phase out lindane treatments, which in turn affected, you guessed it, Chemtura's Canadian lindane operations. It was difficult to challenge Canada's actions since they snowballed from a series of actions initiated by the company's own U.S. affiliate. (See page 28 of this.)
  2. Chemtura's case was undermined by several revealing internal documents that may not be available in other cases, Part II. In 1998, Chemtura had sent an internal communication that arguably revealed a kind of double speak: one the one hand, the company publicly agreed to voluntarily withdraw Lindane from the Canadian market. Privately, they were lobbying for expedited Canadian approval of a lindane alternative that they were using in the U.S.... perhaps as a quid pro quo. This internal communication weakened Chemtura's argument in the NAFTA case when the company tried to paint itself as a victim of regulators. (see page 53 of the decision - linked above and here.)
  3. Better to follow than to lead. I would also just note that Canada was, in this case, taking and facilitating a series of steps to move past lindane that a great many countries had already taken going back to 1968. Canada was a laggard in this regard, and it would have been difficult for the tribunal to side with an investor against a policy of such international pedigree. Countries that are innovators in the field of environmental protection would not have similar "cover."
  4. The tribunal embraced a troubling notion of customary international law. Historically, the notion of "customary international law" has been a pretty limited one, essentially designed to capture the standard behavior of governments. Under NAFTA and other pacts with investor-state dispute resolution, however, unelected tribunalists have expanded the notion of "customary international law" to include stuff that investor-state tribunalists (rather than governments themselves) say. While siding with Canada, the Chemtura tribunal embraced this troubling notion of customary international law (see page 31-32).
  5. Democracies get judged on how quickly they help out corporations relative to other democracies. While ultimately siding with Canada, the tribunal analyzed how quickly Canadian regulators approved company's pesticides relative to their U.S. counterparts to help determine whether Canada was violating Chemtura's NAFTA rights. (See page 67). While a minor part of the overall decision, this is a troubling precedent, and could incentivize corporations to launch investor-state cases when regulatory approvals occur less quickly than they would like.
  6. Many troubling aspects of NAFTA's expropriation doctrine affirmed. As my colleague Matt Porterfield has written, one of the most troubling aspects of NAFTA investor-state decisions is that, in variance with U.S. and most countries' domestic takings doctrine, NAFTA allows corporations to challenge as expropriations regulations that do not destroy/transfer nearly 100 percent of the value of an entire real property asset or interest. The Chemtura tribunal refused to endorse a break from past NAFTA tribunals, which have allowed an expansive definition of property interests, "conceptual severance" (i.e. a subpart of the property is treated as the whole for expropriation analysis), and less than 100 percent value diminution to constitute an expropriation. For instance, the Chemtura tribunal stated that "elements such as goodwill, customers or market share, or those covered under the more generic heading of the Claimant's "lindane business" in Canada, are part of the overall investment..." Such concepts would not typically be considered "property" under U.S. law for takings analysis. These "elements" could have been deemed to be expropriated, even if the rest of Chemtura's Canadian interests survived. And the fact that "net sales of lindane-based products represented approximately [only] 10 percent of" Chemtura's Canadian sales appeared to be the basis of the tribunal's conclusion that the government measure did not constitute a substantial enough deprivation to qualify as an expropriation... rather than how the matter would be analyzed under U.S. law, which has typically been to categorically reject any takings claim below the 95% destruction threshold. If lindane had constituted half of Chemtura's Canadian business, would the tribunal have made a different determination on this point? (pages 71-78)

The tribunal did make a very important statement, however:

"Irrespective of the existence of a contractual deprivation, the Tribunal consideres in any event that the measures challenged by the Claimant constituted a valid exercise of the Respondent's police powers. As discussed in detail in connection with Article 1105 of NAFTA, the PMRA took measures within its mandate, in a non-discriminatory manner, motivated by the increasing awareness of the dangers presented by lindane for human health and the environment. A measure adopted under such circumstances is a valid exercise of the State's police powers and, as a result, does not constitute an expropriation."

This a nice statement, although unfortunately it will not be a binding precedent on future investor-state tribunals, and Canada still had to shoulder half of its legal costs ($3 million Canadian). Policymakers should go a step further and state - in the trade pact text - that non-discriminatory policies that governments take for health and environmental protection cannot be interpreted as violating ANY trade pact terms.

August 20, 2010

Lori Wallach on HuffPo: "Does the U.S. Trade Rep. Secretly Love Higher Tariffs?"

Check out Lori Wallach's latest piece on the Huffington Post:

HuffPo logo 

Does the U.S. Trade Rep. Secretly Love Higher Tariffs?

"For a guy who loves 'free trade' and is supposed to represent U.S. workers and businesses, U.S. Trade Representative Ron Kirk seems way too comfy with tariffs being slapped on American exports. Instead of renegotiating a North American Free Trade Agreement (NAFTA) requirement that Mexico-domiciled tractor-trailers have full access to U.S. roads, Kirk is allowing a second year of sanctions against $2.5 billion in U.S. exports to Mexico..."

Read the entire piece at the Huffington Post.


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