Maryland v. The People's Republic of China

It began as an effort to protect the children of Maryland from unsafe toys. Now, thanks to a disgruntled Chinese government and WTO, Del. James Hubbard’s (D-Prince George's County) proposed legislation in the Maryland General Assembly on potentially harmful chemicals has entered the ranks of “barriers” to international trade.

As you may remember, last year saw a slew of recalled Chinese toys, which were found to contain dangerously high levels of lead. Hubbard, dissatisfied with the Bush administration’s response, proposed a bill that would allow Maryland to monitor its own toys. The bill, which will clear Maryland store shelves of dangerous toys, did more than raise international eyebrows. From a recent article in the Washington Post, here’s how it went down:

The Office of the U.S. Trade Representative alerted the Chinese government, which sent a letter from Beijing to protest the bill as a barrier to trade. Lawmakers in Annapolis were unfazed and passed the bill, which takes effect next month.

Then came a four-page missive from the World Trade Organization's Committee on Technical Barriers to Trade -- in English and Chinese -- opposing another of Hubbard's bills, to ban a chemical compound called bisphenol A that is central to the plastics industry. Manufacturers in the United States and China use the compound in baby bottles and other products. With testimony on both sides, the bill did not pass out of a House committee.

The Chinese said there is "no specific scientific evidence" proving that products containing bisphenol A are hazardous to children.

Hubbard said he believes both complaints were prompted by lobbyists for the chemical industry, here in Washington.

"I truly feel the [chemical] industry and the toy industry are running to China and saying, 'You ought to oppose these bills, and if you don't you'll lose out on product sales in America,'" he said.

The WTO’s signature 'trade until proven deadly' threat justification was successful, and the bill didn’t make it out of a House committee. In an interview on the Kojo Nnamdi Show on Monday, Hubbard expressed his consternation: "This was a public health issue, not a trade issue."

In the past, international trade rules have stretched an intervening hand into state legislatures on a number of important issues, including health-related environmental regulations. Yet the WTO, not to mention Chinese government's attempts to preemptively intervene in a state's legislative process is taking their vested interest to another level.

Concerned that similar legislation would receive such undesired attention in Maine, the state's Citizen Trade Policy Commission issued a letter to the USTR which received this response. Hardly reassuring, their explanation is that the WTO notification system which "normally calls for us to notify proposed agency regulations" had "inadvertly included certain state legislative proposals." They assure it will not happen again in the future.

As states increasingly feel the yoke of international trade agreements in which they have had virtually no say, legislators from around the country are seeking new ways to work together to improve the process of state-federal consultation when it comes to trade policy-making.

Special thanks to Isaac Raisner for his contribution to this post.

Privatization as a cure for preemption?

Today's paper reports that the Senate is privatizing its dining room to get around budget losses, and now countries may be privatizing other entities to get around WTO rules. According to Inside U.S. Trade:

The European Union, in recently released comments on a Food and Drug Administration (FDA) inquiry on how third parties can be used to increase food safety, has said that if the FDA recognizes and relies on certifications that firms live up to private-sector standards, it could violate the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) in the World Trade Organization (WTO).

The EU in undated comments explained that though compliance with voluntary standards may lead to compliance with legal federal requirements, private-sector standards often go beyond what is required by federal governments. For instance, some private-sector standards ban the use of certain legally approved pesticides.

Private sector standards, the EU said, are frequently aimed “at ensuring compliance with legal requirements, but in many cases the provisions go beyond what is legally prescribed to cover issues of labor and social rights, production methods or environmental protection and sustainability."

And some developing countries are upset with the U.S. for its reliance on private, third party certifications across a variety of products, which they claim are difficult to keep current with. Public Citizen is generally skeptical of third party certifications, just as we're skeptical of most privatized regulation. But the EU's commentary shows that this issue cuts many ways: what if private sector standards are higher than the publicly enforced standards? What if countries start privatizing regulation in an attempt to get through a loophole in onerous WTO product standard rules? (That's partially what is at issue here: a disagreement about whether private standard setting agencies fall under WTO jurisdiction.)

And there's more from IUT. At ongoing government procurement negotiations at the WTO, countries are struggling how to address so-called “indicative criteria” that define whether government entities have been privatized:

Indicative criteria are an important issue because if government control or influence has been effectively eliminated over a particular entity, a GPA party that removes such an entity from its list of commitments generally owes no compensation. This became an issue when Japan attempted to de-list a railroad entity with the argument that it had been privatized, and the railroad’s status fell under dispute by GPA parties that lacked previously established criteria by which to judge Japan’s move.

Could a country that wanted to scale back its WTO procurement market access commitments do so by feigning some sort of mass privatization or partial privatization? Would progressives support privatization in that instance? Anyway, this is probably too much wonking out for a Monday morning, so I'll go back to my coffee.

Bhagwati channels Dean Baker on immigration

I knew this day would come. My friend and former boss Dean Baker has been taunting the neoliberals to embrace his idea of free trade in health care and immigration. This was good politics, so long as no neoliberals did so. It served to show their hypocrisy for subjecting steelworkers to unrelenting low-wage competition, while not opening up the immigration floodgates to low-wage doctors. It also showed that our trade policy is not a random inevitability, but structured by real people to benefit real favored interests at the expense of others.

The problem with the strategy is that neoliberals have actually long been much warmer to this idea than Dean let on. As early as the 1970s, corporate lobbyists were trying to figure out ways to put immigration and social services under emerging neoliberal institutions. By 1994, the Clinton administration offered up health insurance and our H-1B visa programs to WTO General Agreement on Trade in Services coverage. And as our report shows, this move by Clinton has hurt the prospects for his wife's health care package.

Many corporate lobbyists (and some WTO nations) want to create a GATS visa that would put the whole of U.S. immigration policy under WTO jurisdiction. This pretty much the gist of the Bhagwati and Madan piece in the WSJ that Dean praised today:

Mode 4 concerns doctors and other medical providers going where the patients are. It offers substantial cost savings, since the earnings of foreign doctors are typically lower than those of comparable suppliers in the U.S.

Now, while it may be interesting to think about the economics of liberalizing immigration, it is something altogether different to think about the constitutionality and institutional aspects of doing so through the WTO. We've found that those in favor of more...

The WTO has no mandate to negotiate migration policy, nor should it... We reject the guest worker model, which inevitably ties migrant workers' right to stay and work in a country to employment with a specific employer, making them vulnerable to extensive abuse that sometimes borders on indentured servitude and undermines domestic and international labor standards.

...and of less immigration...

A WTO-imposed guest-worker scheme would be even more devastating as the global bureaucrats would have sanctioning ability to force our submission to their sovereignty-destroying whims.

...prefer to duke it out on the national stage, where with power comes accountability, rather than at the WTO, where there is no popular accountability. I hope that Dean will clarify that he means he is for free trade for professionals in theory, not in WTO practice.

Poker and peas

Our lawsuit against the govament is getting some traction in the poker world. According to Poker News:

Public Citizen contends that President George W. Bush's administration is illegally withholding details of its agreement with the European Union, which gives the European Union access to more business sectors in the United States as compensation for the country closing off its borders to online gambling...

They aren't the only ones concerned with the details of the trade concessions. Representatives Barney Frank (D-Mass.) and Ron Paul (R-Texas) joined forces in late March to send a letter to U.S. Trade Representative Susan Schwab requesting the information be released as well.   

Another gaming site asks:

Personally, I find it interesting that Public Citizen would find this issue so important. If anything they appear to be against the WTO and globalization in general, but they apparently hate secret trade agreements even more. Politics makes for strange bedfellows, but at this point, we'll take any help we can get to keep this issue in the news.

Yep, Public Citizen is first and foremost a good government group. Once we get some transparency and democracy, we can haggle over what's good policy. And of course by our count, the WTO has been awful for public interest legislation, with U.S. public interest policies rules against 5 out of 5 times (the global figures are 28 out of 30).

In other news, is CAFTA leading to food smuggling of unsafe peas? Here's the Miami Herald:

Redland fresh-produce importer Fresh King used fake importers, false invoices and rigged lab tests to evade a pesticide alert on imported [Guatemalan] peas, according to a recently revealed federal grand-jury indictment...

Mary Bottari, director of the Harmonization Project at Public Citizen's Global Trade Watch, said voluntary food safety testing was ''totally subject to abuse'' because there were no accreditation standards for the labs and no requirement that the results be sent to the FDA.

''The issue of how these folks can currently buy their own laboratory is one of the single most important things being discussed on Capitol Hill with regards to food safety,'' Bottari said.

Oregonians Bring The Pain to the Death Squads

The Oregon Fair Trade Campaign rallies outside of the office of Rep. Darlene Hooley (D-Ore.), who has yet to take a position the Death Free Trade Agreement (aka Colombia FTA).

Linda Sanchez v. Bart Simpson

Fair trade champion Rep. Linda Sanchez (D-Calif.) is pushing a bill that would grant U.S. consumers and states greater power to serve legal papers on foreign manufacturers that sell defective products in the U.S. market. As we documented last year, foreign producers can rarely be held liable for damages they cause U.S. consumers, a reality not helped by WTO rules and that has promoted offshoring of U.S. jobs and importation of unsafe products. As Ed Mierzwinski from PIRG put it in his testimony for Sanchez's subcommittee (also on our behalf):

By making it easier to hold foreign wrongdoers accountable, your bill would help consumers gain access to justice and also help equalize pressure on U.S. firms that may bear unequal treatment under our laws.

Of course, your bill importantly does not eliminate any responsibility or liability for U.S. manufacturers, importers, distributors, or retailers. It simply makes it easier for consumers to obtain redress from foreign manufacturers. All wrongdoers should always be held accountable.

Last year, for example, Mattel used what I call the Bart Simpson defense (“I wasn’t there, I didn’t do it, and it’s not my fault”) when it initially blamed a third-party Chinese supplier for failing to follow its lead paint requirements on a toy that was later recalled.8 Mattel, of course, under the Consumer Product Safety Act and the Federal Hazardous Substances Act, violated U.S. law by entering the banned hazardous substance into U.S. commerce. It trusted, but failed to verify. Mattel would still face liability even if one of its third-party foreign suppliers also did under your act...

Unfortunately, globalization has provided too many firms in the global supply chain with the wrong incentives: they want to cut corners, they want the cheapest supplier, they don’t do third party testing and they use cheaper, dangerous chemicals instead of safe ones. This has placed consumers worldwide at risk. By strengthening U.S. product safety laws and strengthening the ability of U.S. consumers to seek redress from more wrongdoers, actions by U.S. policymakers can benefit all consumers worldwide, since it will ultimately be more efficient for manufacturers and retailers to supply everyone to meet U.S. levels of safety rather than face U.S. levels of liability.

Liability in a globalized world

Much of the U.S. consumer movement has encouraged the development of punitive damages, mostly because of the massive holes in our regulatory and social safety net structure. Now, the New York Times reports that other countries are pushing back when asked to enforce U.S. punitive damage awards.

Still, as Europe rolls back its own social safety net, some European analysts are looking more favorably on the U.S. punitive damages' system as a stopgap measure to protect consumers. Ironically, U.S. courts, as reported in the article, are rolling back and limiting punitive damages claims... but with no social safety net to take its place. Seems like both continents are moving rightward, although in Europe, the frog may be getting so slowly boiled that there's less screaming about this issue. In the U.S., we may already be too boiled to tell.

Actually, we're not just moving back to a neutral place where there are no punitive damages. Through trade deals like NAFTA, corporations are actually creating systems of corporate "punitive damages" where the force of the law is used to their enrichment. Occasionally, they're claiming corporate-style punitive damages at the same time that they're using NAFTA to attack traditional pro-consumer punitive damages. From the NYT:

Foreign lawyers and judges are quick to cite particularly large American awards. Julian Lew, a barrister in London, recalled a Mississippi court’s $400 million punitive award against a Canadian company in 1995 with scorn. “It did bring America into total and utter contempt around the world,” Mr. Lew said.

The Canadian funeral home multinational, Loewen, at the bottom of this case actually used NAFTA to try to collect investor-state damages from the U.S. government for the attitude problems of the Mississippi "jury of your peers," in a case that the U.S. lost on the merits (the overall case was won on a technicality). We document the history here. Whatever one thinks of the tactics used by the Mississippi lawyers and judge, it seems like quite an overreach to make the U.S. government liable under NAFTA for these local problems that are just part of the institutional reality of this country.

Also, as we documented in our toy report, corporations are actually using offshoring as a way to limit their liability to consumers. As even the American Enterprise Institute's Doug Besharov conceded:

“[f]or many American claimants, the full enforceability of products liability laws stops at the shoreline. The situation worsens every year as imports fill more and more of the United States market... [the lack of liability creates an] artificial price advantage [that] will help [foreign producers] build market share, at the expense of United States consumers and insurers as well as competitors.”

New report: Clinton, McCain, Obama - can we go a little deeper?

As long promised, we published a report today that Mary Bottari and I wrote that looks in detail at the Clinton, McCain and Obama plans on health care and climate issues. Our focus is on what changes need to be made to the WTO, NAFTA, and other trade pacts to allow for needed policy space in this area. Here's the press release for the report:

To Implement Domestic Campaign Policy Priorities on Health Care and Global Warming, Future Presidents Must Alter Existing U.S. Trade Commitments

New Public Citizen Report Identifies Changes to WTO, NAFTA Rules Needed to Facilitate Candidates’ Proposals on Health and Climate

WASHINGTON, D.C. – Public Citizen today identified changes needed to World Trade Organization (WTO) rules and the investment provisions of the North American Free Trade Agreement (NAFTA) to implement a dozen of the presidential candidates’ key health and climate policy proposals.

The changes were detailed in a report, “Presidential Candidates’ Key Proposals on Health Care and Climate Will Require WTO Modifications, Overreach of WTO Highlighted by Potential Conflicts with Candidates’ Non-Trade Proposals,” released today, available at http://www.citizen.org/documents/PresidentialWTOreport.pdf

“Growing public ire about our current trade and globalization policies’ damage to Americans’ economic prospects has played an enormously important role in this election, with most candidates committing to reform NAFTA,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division. “But candidates and voters have little idea that some of the candidates’ domestic policy priorities on health care and climate change could be limited by the overreach of so-called trade agreements like the World Trade Organization. The need for a comprehensive overhaul of the WTO could not be more urgent.”

Although they have nothing to do with trade, key health care cost containment proposals on the creation of health insurance risk pooling mechanisms, reduction of pharmaceutical prices and electronic medical record-keeping, a proposal to expand coverage by requiring large employers to provide health insurance and a proposal to establish tax credits for small employers as an incentive to provide health insurance fall within WTO jurisdiction. In addition, proposals that address climate policy, such as increasing CAFE (Corporate Average Fuel Efficiency) standards, banning incandescent light bulbs, establishing new regulation of coal-fired electric plants and establishing national renewable portfolio standards (RPS), green procurement proposals and green industry subsidies come under the jurisdiction of existing U.S. WTO commitments.

“Corporate lobbyists, previous U.S. presidents, and ‘free market’ think tanks worked hand-in-hand to lock in corporate privileges on health care, energy and other domestic policies and shield them from small ‘d’ democratic reforms of the kinds proposed by Clinton, McCain and Obama,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch division and an author of the report. “Now is the moment presidential candidates must stand up for their important domestic platform priorities and commit to renegotiate the WTO and other flawed trade deals.”

Moreover, the candidates haven’t addressed the need to renegotiate other provisions in trade deals like the WTO, NAFTA and other NAFTA-style trade deals that severely limit future presidents’ policy space to enact legislation on non-trade issues.

“Trying to work within the tiny policy space permitted by existing WTO rules would result in the challenges surrounding America’s health care debacle and the global climate crisis being defined so narrowly as to ensure real redress is impossible,” said Wallach. “The candidates must reject corporate calls for watering down their proposals and instead emphasize opening up the much-needed policy space to provide real solutions to pressing domestic concerns.”

The Bourne Gamble

The WTO Antigua case on Internet gambling has highlighted many of the problems with our current trade policymaking process - the hazards of Fast Track-enabled trade agreements that undermine the public interest and ignore state and local officials, overreach and interfere with our domestic policy, and can trigger millions of dollars in compensation to other WTO countries. Now, the problems with the secrecy of this compensation and negotiation process have come to light.

According to a new CQ article (sorry, not linkable), the compensation agreed on between the US and EU, Canada, and Japan for withdrawing the gambling sector from our WTO commitments is classified for national security reasons.

Ed Brayton (a freelance writer who opposes the government’s anti-gambling measures) filed a Freedom of Information Act request with the Office of the U.S. Trade Representative after the deal was announced in December. He says he just wanted to know precisely how much the United States was conceding in the December deal to maintain its gambling ban. The agency’s chief FOIA officer, Carmen Suro-Bredie, replied that the USTR was withholding the agreement because it was “classified in the interest of national security.”

Although upon announcing the agreement, USTR said it involved "commitments to maintain our liberalized markets for warehousing services, technical testing services, research and development services and postal services relating to outbound international letters," they are apparently refusing to tell the public any further information. Instead of taking the opportunity to learn from the colossal mistake of committing gambling to the WTO and now include more state officials and the public in the process, the USTR is continuing to conduct US trade policy in a shroud of secrecy.

Hopefully, Brayton's persistence will pay off:

Brayton says he’s planning to appeal the denial, which would force the trade office to explain why the agreement implicates national security. He says he suspects the agency may have something else in mind: hiding what could amount to billions of dollars in trade concessions.

“I can’t even imagine a reasonable explanation other than that in the furthest reaches of my imagination,” he says.

How corporate lobbyists got-r-done

It's our unfortunate duty here at EOT to have to read some truly mind-numbing trade law analyses of domestic regulation. For instance, have you ever really thought about whether electricity is a good or a service? Yesterday, I had to read through a 1998 WTO document that goes through this metaphysical question in excruciating detail. Short answer: if your electricity comes from coal, well then the coal itself is a good. But once it becomes electricity, it's probably a service, because you can't plop a piece of electricity down on your dinner plate.

Since the Bush I and Clinton I administrations committed many energy-related services to the restrictive WTO service sector agreements, there's a good chance that many of Clinton, McCain and Obama's proposals on energy could run afoul of WTO rules. So if the political reasons to talk fair trade weren't compelling enough, there's plenty of good policy reasons as well.

You may ask yourself, how did we get to the point where lawyers sat around thinking of basic human rights to turn into "tradeable commodities/services"? To paraphrase Larry the Cable Guy, this 1992 intellectual history article by William Drake and Kalypso Nicolaidis shows how corporate lobbyists "got-r-done":

The very act of defining services transactions as ‘trade’ established normative presumptions that ‘free’ trade was the yardstick for good policy against which regulations, redefined as nontariff barriers (NTBs), should be measured and justified only exceptionally. Members believing there to be many justifiable exceptions thus had to defend what their counterparts label ‘protectionism.’… [the services trade lobby’s] body of work took on the attributes of a social science literature in which authors cited, critiqued, and built on each other's analyses. But unlike most academic debates, in which contending theories and assumptions remain contested, the services discussion produced broad and lasting consensus on core concepts and objectives. Community members were by now unanimous in their dedication to the common policy project of placing services on the GATT agenda, and this relevance test precluded meta-theoretical differences of the sort familiar to political scientists. Disagreements were confined to the issue of which GATT principles and processes were right for which transactions, rather than to the question of whether services should be treated as trade in the first place.

This gets back to my point about how savvy corporate interests are at incrementalism. You don't have to totally commoditize everything in a single day or single WTO round: just getting some definitions on the table can get the corporate animal spirits spirited up. Before you know it, public interest advocates are on the defensive, having to articulate why they thought regulation was necessary in the first place. And unfortunately, even many of our best politicians attempt to strike a "middle ground" between the previously unthinkable corporate takeover and the public interest, leading to a continual rightward drift.

Globalization of Higher Education

Fascinating article in the Sunday New York Times, kicking off a series on globalization and higher education.  Did you know, for instance, in Doha, Qatar, you can get a Cornell, Georgetown, Carnegie Mellon, Virginia Commonwealth, or Texas A&M degree? 

American universities – even public higher education institutions – are trying to create a global brand for themselves, despite the difficulties of meeting local requirements and transitioning faculty and staff, in the hopes of attracting new funding opportunities and more students globally. 

There are plenty of downsides and upsides to mull over when we're talking about public and private American institutions establishing comprehensive higher education campuses in far flung locales, but one thing is clear.  As universities from the United States, Australia, England and other countries seek to market their global brand, higher education will increasingly be approached as a profit-making business instead of as a public good.  This is particularly worrisome when we consider that higher education is one of the "service sectors" that the United States is considering offering under WTO GATS jurisdiction. 

Given the perils of permanently binding important, regulated services to WTO rules, offering higher education would be a mistake – if not so obviously now, then certainly in the future.  The lines between "public" and "private" are blurry in higher education, and locking our education policies to a set of trade rules would unnecessarily constrain our policy space and further undermine public education down the road.

Global justice on the move, with global ambulance chasers right behind

I am pretty jazzed from a great weekend spent with the Citizens Trade Campaign, whose far-flung organizers from around the US came to town this past weekend for a national meet-up. These coalitions - from Oregon to Maine, from Texas to Minnesota and all parts in between - are truly the front-line for the campaign to overhaul our trade policies to align them with the public interest. There was a lot of fascinating presentations on the trade-linkage to immigration, climate change, labor, and higher education issues, which I think will be fueling a lot of interesting work in the year ahead. Indeed, the resolutions and other policies that this group will be pushing - especially at the state level - are part of those educational building blocks that will help us move towards our goals over the coming decades, which is what it will take to fundamentally change the way we approach global warming policy.

Incrementalism is also a feature of the other side's approach to the issue. As ITN documents in their latest issue, corporate interests have made some calculated gambles on a series of investment cases which - even if they don't produce an immediate win - chip away at the public interest by building very pro-corporate case history.

The first was a NAFTA case brought by a Canadian corporate cattlemen group against the U.S. border shut down following the episodes of mad cow disease in Canada. This coalition maintained that this US action - even though they had no observable investment in the US - violated their investor rights in the US. The NAFTA panel ruled against jurisdiction on the claim, even though they have done nearly the opposite in the SD Myers case where there was little or no overseas investment. And they also left the door open to challenge of the US food safety measure under other parts of the NAFTA agreement. So, lost the battle, but well positioned for the war. (Note that these precedents aren't binding on future panels, so unpredictability reigns!) 

The second item of interest is the advice being given to Internet gambling companies that are dismayed that the Bush administration bowed to pressure and removed gambling services from WTO jurisdiction. The global "ambulance chasers" - out to help corporations claim victimization and bilk all sorts of payments out of the corporate handout that is our "trade" policy - are advocating that these companies use bilateral trade and investment agreements to get compensation for not being able to serve U.S. gambling addicts their online fix. This is precisely the kind of corporate checkmate that our "trade policy" allows - first we get you at the WTO, then under CAFTA, then we let investors privately get you under other treaties, etc. - all the while getting payments from taxpayers. When are we going to see some elected officials willing to face down these jerks and kick over the chess table?

The field narrows, and advice from Feingold

This just in... Romney to pull out... On trade, Romney started out his campaign by talking about how great offshoring was, only to end up in Michigan talking about fighting for manufacturing jobs. A strange thing, democracy - when it works, it ends up changing the positions of those in power.

Even Huckabee, who as governor of Arkansas signed his state up for the procurement chapters of NAFTA-style deals, channels some of our own Holly Shulman from earlier in the week:

When President Bush agreed with House Democrats on a stimulus package centered on big tax rebates, for example, Mr. Huckabee raised the hackles of supporters of free trade by arguing that the plan in effect subsidized the Chinese manufacturers of imported consumer goods. And he argued that the money would be better spent building roads, bridges and other infrastructure projects at home, irking proponents of limited government.

In the wake of Edwards losing the race, there are now new power centers pushing on Clinton and Obama to fair trade it up. As John Nichols writes:

"Talking about experience and idealism is so much conversation for Wisconsin people," says Feingold, a three-term U.S. senator who serves with Obama and Clinton and who flirted with making a presidential run of his own this year. "We'd like to hear something about what they're going to do. It's amazing to me that this campaign has gotten as far as it has without getting down to specifics. But Wisconsin voters expect more from the candidates than the slogans." Like what?

Feingold says that the two remaining serious contenders for the nomination need to bone up on trade policy -- and its impact of real people in places like Wisconsin.

"I would urge them to be aware of the devastation that has occurred for people in the state over the past twenty years as a result of trade policies that were forced through Congress without any concern for working people in states like Wisconsin," says Feingold, who has since coming to the Senate in 1993 consistently opposed the free-trade agenda of both the Bill Clinton and George W. Bush administrations.

The campaign — especially on the Dem side — could get pretty interesting as the candidates grasp at something — anything — to differentiate between the two. Feingold's suggestion seems pretty savvy to me.

(Disclosure: Global Trade Watch has no preference among the candidates.)

Communism for capitalists: WTO limits on global warming policy

There is little doubt that government will play THE leading role in stopping further global warming - no other institution in society has the police power or administrative economies of scale to make it happen, regardless of the specific combination of mechanisms to be used. All of the Democratic candidates (see here, here, and here) crib some portion of their climate change / green jobs proposals from the ambitious Apollo Alliance project, which sees a primary role for government, even it its more voluntary aspects. Portions of this agenda are also in a bill co-sponsored by all current senators of both parties running for president.

Well, as this stunningly candid report from the pro-corporate National Foreign Trade Council attests in explicit detail, virtually every component of a response to global warming is WTO-illegal. NFTC recounts the history of environmental policy at the WTO (and GATT), including the past successful challenges to our Clean Air Act and corporate average fuel economy (CAFE) standards. They go on to explore how every global warming bill in Congress - elements of which are reflected in the candidates' plans as well - violates WTO rules.

Among the possible WTO violations: energy efficiency regulations and standards, government-administered eco-labeling (even voluntary labeling, as Andrew Green has argued and which is cited in the NFTC paper), public procurement of climate-friendly goods and services, and possibly even emissions trading or auctioning - long seen as one of the most market-friendly way of addressing global climate change. This is mostly because of the challenge in finding a way to require domestic manufacturers to comply with costly reforms while importers importing from less-regulated countries don't have to comply.

Democracy, science, class

An ongoing debate in legal theory related to trade policy is the use of the so-called "precautionary principle," variably formulated as "better safe than sorry" or "putting the burden of proof" on industry before it introduces new medicines, technologies or processes on the market.

Consumer and environmental groups tend to invoke this principle, based on the notion (however articulated) that corporations, left to their own devices and ability to sway policy outcomes, will advocate for courses of action that devalue human suffering or environmental damage in the name of making a buck. But some legal scholars don't like the precautionary principle. In The New Republic's Cass Sunstein's words:

The precautionary principle should be rejected, not because it leads in bad directions, but because it leads in no direction at all. The principle is literally paralyzing - forbidding inaction, stringent regulation, and everything in between. The reason is that in the relevant cases, every step, every inaction, creates a risk to health, the environment, or both.

Happily for Sunstein and comrades, the precautionary principle is not what prevails under our trade law. The WTO's Sanitary and Phytosanitary Standards agreement - one of 17 that the WTO maintains - reads:

Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence [emphasis added]

There's a lot of background on how to define what is "necessary" under international trade law, but suffice it to say that it's a lot more restrictive than how it reads here. Europe has been learning the hard way about how some of their food policies influenced by the precautionary principle have taken a beating at the WTO.

On art, confronting corporations and regulatory chill

I've been rocking out to some Rage Against the Machine lately. They're a band I had kinda forgotten about for much of the last decade, although like many people of my generation, they were my first exposure to a politics that went beyond the staid participation in ballot box politics that characterized many of the older folk in my life. While my hometown of Louisville was a center for "straight edge culture" much of the early 1990s, RATM had lyrics that addressed that went beyond personal politics and to the interconnections between oppression at home and abroad, and was unflinchingly committed to social change. For instance, take this lyric from 1999's "Ashes in the Fall":

Ain't it funny how the factory doors close
Round the time that the school doors close
Round the time that the doors of the jail cells
Open up to greet you like the reaper

This perspective fits very comfortably with that of HBO's "The Wire," another recent obsession at my household. Art, unlike some of the politics of the policy-making process, can make a clarion call for change that is not bogged down in wonkish qualifications on legislation, for instance. It seems that the art community is way out ahead of the broader progressive community in terms of ability to communicate a message and create a popular desire for change.

By contrast, industry holds hegemonic sway in Washington. At an event held this morning at the Ronald Reagan International Trade Center, representatives from the Bush administration, and toy and retail industries - despite a year of record outcry about imported product safety - brazenly held forth about how, in their opinion, the public and the government has little to no role in regulatory checks and balances. Corporations can do it better. Among some of the choicer quotes:

• "While we welcome lower lead standards, they are difficult to implement in the next year. We may have already placed our Christmas orders months ahead. We will be covered this year by the same high lead standard that has protected consumers for years."
• "We think that the recent recalls do not indict the system. On a strict numerical basis, we’re consistent with past years. The CPSC is getting more efficient… like the private sector, the public sector is getting better at doing more with less. The recalls of the last year show that the current system of self-reporting is working."
• "We’ve heard from our supply chain that the costs of complying with duplicative testing – and a CBO study confirmed this – increase the costs to consumers by 10%. This is not a good thing for consumers."
• "there’s no credible report of injury from lead inside the products… we should focus on hazards that post the biggest threat… it would be shame if parents were looking through their toy box while ignoring their window sills."
• "Our economic viability has to do with confidence of consumers, with our brand integrity. There are specific complexities to sourcing overseas, in addition to the efficiencies and cost savings from this vast production capacity. The worst thing that could happen is that we turn inward, that we turn protectionist. The marketplace is much more complex than the 1950s’ model of domestic supply."
  
• There were loads of other good nuggets on the ongoing attemptsby Congress to put together a Consumer Product Safety Commission bill, including slams on CPSC disclosure to the public of company information, on efforts to create a STOP button to block unsafe imports at the ports, on an increased role for state attorney generals (who are apparently "political people" in contrast to Bush appointee Nancy Nord), and the Senate for not getting permission from industry before writing their bill.

That industry lobbyists feel they can even getting away with suggesting that parents' safety concerns are not real, or that the industry can self-regulate, just indicate how far we've come from any sense of shared societal responsibilities and class co-existence.

But what's even more disheartening is the reaction from "the other side of the aisle." Progressives on our side are often having the debate while looking at their own feet, fixated on the legislative details while corporations rule the roost.

From inside the halls of Congress, it's even worse. Even though the import safety crisis is THE reason why there's a major CPSC debate this year, the House Energy and Commerce Committee admitted that it wouldn't be addressing the public outcry over imports in its CPSC legislation because World Trade Organization rules block them from addressing the issue.

A lawyer for the committee said that, after consulting with USTR, the Democrats could not come up with a way to increase CPSC's authority over imports, to establish a STOP button that could halt unsafe imports at the ports, or to establish that importers post a bond to cover the cost of recalls - VERY minimal reforms I might add - because 

"We were very concerned that when it came to the trade authority process, we wanted to ensure that no provisions would run afoul of the WTO’s Technical Barriers to Trade agreement ... [on the STOP button] it made us uncomfortable to halt imports under mere suspension of non-compliance. The arbitrary use of this authority might be an unwarranted barrier to trade... [and on the bonding requirement] Our committee staff looked at this issue, and we weren’t able to find a WTO-compliant method of doing this."

It's pretty rare that a policymaker is so candid about their reasons for not adopting progressive domestic legislation. As we document in our latest reports on toy and food safety, the threat from the WTO and other FTAs is real. But the answer isn't to back off of pursuing progressive legislation - the answer is to move forward with, while also renegotiating the international rules. Indeed, the total cave-in of the House on this issue in the latest bill illustrates the folly of moving along just one of the tracks. In short, we need to take away the excuse that our elected officials have for not meeting our desires.

All these change agents, and I still can't break a 20

The growing usage of the phrase "change agent" has to be the oddest and most incongruous adaptation of radical thought into recent American political discourse. For many folks on the left, some variation of the phrase "change agent" has denoted the working class, the multitude, oppressed nationalities, etc. Overnight, everyone from Mitt Romney to Hillary Clinton assumes the mantle previously given to very large, very strategically placed groups of people.

Whatev. Here at Global Trade Watch, as we are apt to disclose, we have no preference among the self-designated change agents. What we are concerned about is how the struggle for a break from the neo-liberal policies of the past is informing or being informed by the horse race now moving on to South Carolina, Nevada, Michigan and beyond.

The good news is that many of the candidates, including last night's victor Hillary Clinton, are coming up with specific ways that they would change trade policy, as the Iowa Fair Trade Campaign documented in the letters it received from the candidates.

One of the major issues that a new president will likely have to deal with is an economic recession, and they will have to come up with ways to deal with the problem. Corporations have worked hard to ensure that constraints are put on the ability of people to democratically determine how they get themselves out of a recession. Thus, while many of the candidates banter on about international labor and environmental rights that are largely unenforceable in current trade policies, relatively short shrift has been given to the ability to break from NAFTA-WTO style policies during times of national crisis.

In last year's debate over the Peru FTA (and the 2006 debate over the Oman FTA), some attention was given to trying to come up with policies that would safeguard the ability of the U.S. government to block without FTA challenge any takeover of U.S. ports by foreign entities. The "great leap forward" given by our fearless leaders in Congress (they're like 535 little change agents!) was to insert a clause into the "revised" Peru FTA that read:

"Nothing in this Agreement shall be construed: ... to preclude a Party from applying measures that it considers necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests."

Some are claiming that this allows "full non-challengeable authority" for the U.S. to do whatever it wants if it invokes this so-called "national security" exception.

Unfortunately, the history of these clauses are a little murkier, as this law review article shows. Take the case of Argentina. In 2001-02, the country of my childhood went through an economic recession on par with the Great Depression. The government took a series of measures that it deemed necessary to insulate it's citizens from the worst aspects of the recession - a regulatory move that has made it the target of countless challenges from multinational corporations. These corporations, including Enron, have used NAFTA-like provisions in so-called bilateral investment treaties (BITs) to go after the country in foreign courts and demand billions in Argentine taxpayer dollars. Their gripe? Argentina making use of these so called "non-precluded measures" during a time of national emergency.

As the aforementioned article by William Burke-White and Andreas von Staden argues, even though the U.S. and other countries have tried to move closer to a clearly "self-judging" standard on these "non-precluded measures", the case history shows a lack of agreement among the corporate trade elite about this discretion.

When Enron sued Argentina, for instance, the corporate trade tribunalists ruled that Argentina could not decide for itself what measures it could take during an economic recession (and avoid challenge and compensation claims). But in a very similar case brought by LG and E, the tribunal ruled the exact opposite way. (See pages 106 and 4 respectively). Both these cases were brought under the U.S.-Argentina BIT, which is like the investor-state regime inserted into NAFTA-style trade agreements.

Anyone still think we're immune from what our corporations have gotten written into pacts that we're party to? Anyone who still thinks it's a good idea to offer up sovereignty to such a fickle, unelected grouplet of trade specialists? Anyone who still buys the idea that you can offer up whole swaths of the U.S. economy and regulatory structure to FTA dictates, and then hope and pray that clever exceptions will stand up when the corporate class wants to teach democratically elected leaders a lesson? (As Sirota points out, they're already in the ginger phase one of that lesson here in the U.S.)

Divorced from reality

(Disclosure: Global Trade Watch has no preference among the candidates.)

With last night's win for Obama and Huckabee, there will be increased scrutiny on the record of these candidates. (This has already begun over at IELP and the Custom House and here in the press.)

Huckabee has some comments on globalization and is perceived to be running an economic populist campaign. People will be looking for more detail. As governor of Arkansas, Huckabee was one of only 8 governors to explicitly put their state onto the procurement chapters of pending trade agreements including CAFTA (in 2004) and the NAFTA expansions to Peru and other Andean countries (in 2005).

Regular readers of this blog will know that there's a great deal of opposition to these procurement and other harmful trade pact provisions. Common state economic development and environmental policies are prohibited by trade agreement procurement rules. Such policies include:

• Measures to stop the offshoring of state jobs;
• "Buy Local" or "Buy America" policies;
• Preferences for recycled content, renewable energy, alternative fuel vehicles and more.

Obama, for his part, has been further articulating his trade position over the last few months, after supporting the Peru FTA, and another past vote on a NAFTA expansion. As we've reported here, Obama has been taking increasingly specific positions on product safety, and made other comments in a note to the Iowa Fair Trade Campaign. All in all, trade is playing a major role in this race, as it did in 2006 as well. (For more on this argument, see David Sirota and John Nichols.)

But aside from some of the insightful analysis that's taken place, there's this from David Brooks in today's NYT:

Huckabee understands how middle-class anxiety is really lived. Democrats talk about wages. But real middle-class families have more to fear economically from divorce than from a free trade pact. A person's lifetime prospects will be threatened more by single parenting than by outsourcing. Huckabee understands that economic well-being is fused with social and moral well-being, and he talks about the inter-relationship in a way no other candidate has.

Stumo already took a jab at Brooks, but I asked an economist friend who specializes in labor and family economics to break it down a little more for me. Here's what she had to say:

Middle class families fear divorce because it put them at risk of poverty and bankruptcy. The problem, however, is not the failure of families to stick together, it's that the it now takes two incomes to raise a family. A generation ago, a single breadwinner could support a family, but this is no longer the case. The overwhelming majority of children living in married-couple families have no stay-at-home parent. This means, that today when a family gets divorced, the incomes are cut in half, whereas a generation ago, the mother could enter employment and thus the income fall would not be as large. Families with only a
male-breadwinner have incomes that are the same, in inflation-adjusted terms, as they were in the mid-1970s, whereas it is only families with a working wife who have seen their incomes rise. Trade policy certainly plays a role here, as median male wages are currently barely above their 1973 level.

And if you don't believe her, here's a nifty graph to prove it.

New England states call for a new direction on trade

Maine, New Hampshire and Vermont have already been active in demanding a new direction on trade (see here, here and here) and are now banding together to call for better federal consultation with states on trade issues. In a meeting in Portsmouth, the three states' commissions on international trade met to discuss how these "trade" agreement undermine state regulatory authority.

State Senator Jackie Cilley (D-N.H.) explained to the Sun Journal:

"Whether its managing groundwater permits, regulating unsafe toys or using our tax dollars to buy products made in the state, international trade rules can make it harder for us to represent our constituents."

State Senator Virginia Lyons (D-VT) echoes these concerns:

"Free trade agreements are to state sovereignty and economic development what global climate change is to the environment and natural resources. I think it's a really significant issue for our state, and for every state in the country."

As the article points out, many state legislators have been concerned about this issue and the National Conference of State Legislatures passed a new policy position on "Free Trade" and Federalism in August, reflecting the need for reformed trade policies and more consultation with states on trade agreements.

Christmastime for corporations (in Germany, err, here)

Just in case you were worried that the corporate masters weren't getting enough of a Christmas this year, what with record CEO pay and booming inequality, never fear. It looks like they may get to gobble up U.S. Postal System, liquiefied natural gas terminals, Mexican peasants, the right to avoid obeying the law overseas, and right to not give back to the community. Let's quickly review:

The Bush administration is on the cusp of formally revealing what they're going to give the European Union to "compensate" for their Internet gambling providers not being able to sell in the U.S. market. As we detail in our release here,

To compensate Europe for the removal of the U.S. gambling sector from WTO jurisdiction, the Bush administration reportedly proposes to bind U.S. storage and warehousing, and postal and delivery to WTO jurisdiction, among other service sectors. Compensation talks have been conducted behind closed doors without input from congressional committees whose jurisdiction would be compromised by the proposal.

What this could mean in practice is that there would be additional pressures to privatize and deregulate not only our postal service, but also our safety policy around dangerous LNG terminals. Oh, yeah, and this is just for the right to maintain a gambling policy that corporations don't like - a policy that treats foreign and domestic gambling firms THE SAME.

Exhibit Two takes us to Mexico, where corporations have reportedly used NAFTA's investor-state system to beat back the Mexican government's right to have a sugar policy for its small peasant producers, rather than allow U.S. high fructose corn syrup exporters and users (the soft drink companies) to run roughshod over a rare policy that keeps Mexicans employed in Mexico. Now, Mexican taxpayers will be ordered by a secretive World Bank court to pay what will probably be tens of millions of dollars to companies like Archer Daniels Midland.

As we wrote about the case back in 2005, Mexico's regulations of HFCS, which it will now be forced to compensate ADM for, were one of the few ways that governments could take active steps to keep farmers on both sides of the border from being squeezed by huge agribusiness corporations. It turns out that's it's inconsistent with NAFTA to help society's most vulnerable.

The final stop is north of the border, in Canada, where U.S. oil companies are using NAFTA to get around having to give back to the community where they are drilling by spending some research and development dollars there. This parallels Big Oil's efforts to  avoid having to pay taxes in Ecuador, where it is using a NAFTA-style tribunal under the U.S.-Ecuador Bilateral Investment treaty to not only not pay, but try to get out of being arrested for not paying. Luke Eric Peterson has the skinny on the Mexico, Canada, and Ecuador cases right here.

And in our ongoing Trade Musical Hits, here's Rage Against the Machine's "Testify," directed by Michael Moore.

Your civil rights are a barrier to trade

As we've written about for a long time, "trade" rules are increasingly limiting how our own taxpayer dollars can be spent, namely by banning or rolling back Buy America, green procurement, and human rights conditionality in competing for state, local and federal government contracts - the use of which is one of the very few ways that our elected officials can directly create jobs, and shape the morality of the marketplace.

In a rare sign of morality (or at least political savvy) from the corporate class that drafts these agreements, they've generally excluded minority preferences and set-asides from coverage from trade pact rules.

But this may be ending. According to Luke Peterson's Investment Treaty News, the best source of information on investor-state proceedings anywhere, a group of European mining companies is suing South Africa under a bilateral investment treaty between their respective countries. Their gripe? Having to hire black South Africans.

The investors posit ... that a series of obligations imposed upon mining companies, including hiring "historically disadvantaged South Africans", violates treaty undertakings by South Africa to provide fair and equitable treatment to foreign investors...

According to Mr. Leon [the corporations' lawyers], the key tenets of the new mining regime, including the Black Economic Empowerment requirements, "potentially conflict with South Africa's international law obligations".

Mr. Leon opined that bilateral investment treaties should afford foreign investors higher levels of financial compensation than would be available under South Africa's Constitution. He added that by signing and ratifying a series of bilateral investment treaties, South Africa "has, in effect, outsourced the adjudication of key elements of its public policy to foreign arbitral tribunals".

The "fair and equitable treatment" standard referred to by Luke, also known as the "minimum standard of treatment", is why corporations are pushing hard not only for bilateral investment treaties like the one between South Africa and the European countries, but also "innovating" on this practice by inserting them directly into "free trade agreements", as we do only here in America through NAFTA-style trade policy.

What does the standard mean? As Matthew Porterfield explains in this law journal article,it basically says that foreign investors (and any corporation that can claim "foreigness" by playing games with their corporate structure... think Halliburton's relocation to Dubai, folks) can be required to be treated more favorably than that allowed for under domestic law.

This obviously wreaks havoc on any progressive reform or legislative efforts here or anywhere in the world. If corporations can bypass the domestic political / democratic process and use foreign trade tribunals to define how they have to be treated anywhere in the world (regardless of domestic civil rights, environmental, or labor law), then the end is very nigh.

For T'giving, Mellow out or you will pay

So spake Jello Biafra in his tribute to former California Gov. Jerry Brown. So I am doing that, having scheduled this post to go up while I am on break.

But that's no reason to not be thankful for some fair trade victories. Jerry Brown, now California's attorney general, is suing the people-squashing corporations:

LOS ANGELES—California Attorney General Edmund G. Brown Jr. and Los Angeles City Attorney Rockard J. Delgadillo today sued twenty companies for manufacturing or selling toys with “unlawful quantities of lead.”

Commenting on the lawsuit which was filed today in Alameda County Superior Court, Attorney General Brown said, “Companies must take every reasonable step to assure that the products they handle are safe for children and their families and fully comply with the laws of California. Despite the lengthening global supply chain, every company that does business in this state must follow the law and protect consumers from lead and other toxic materials.”...

Companies subject to today’s lawsuit include: Mattel, Fisher-Price, Michaels Stores, Toys R Us, Wal-Mart, Target, Sears, KB Toys, Costco Wholesale, A&A Global Industries, RC2 Corporation, Eveready Battery Company, Kids II, Kmart, Marvel Entertainment, Toy Investments.

Center for America's Future has a pretty funny video about this:

This is one important plank of beginning to hold corporations accountable for the safety of the products that they have offshored production of. On another plank of this project, another Brown, this time Sen. Sherrod Brown (D-Ohio), is trying to update our current laws on product recalls, which were designed for a time when most domestic consumption was domestically produced:

The Food and Product Responsibility Act of 2007 (S.2081) would require that distributors of food and consumer products demonstrate the financial capacity to cover risks associated with recalls and product safety. Specifically, U.S. Customs and Border Protection, in conjunction with other agencies, would develop a program to ensure distributors are able to cover the costs associated with both product recalls and all personal and property damages that may occur as a result of a defective product. Distributors would demonstrate that they possess product recall and liability insurance or have sufficient financial resources to afford a recall and any subsequent damage claims. Products covered would include: Auto parts, Food, drugs, devices, and cosmetics, Biological products, Consumer products, Meat, meat products, poultry, and poultry products, eggs and egg products.

In addition, Brown’s legislation would grant the Secretary of Agriculture the authority to require mandatory recalls of meat, poultry, and egg products and grant the Food and Drug Administration (FDA) the authority to require recalls for fruits, vegetables, and other products it regulates.

OK, and just cuz we're having so much fun with the Browns, I want to post the aforementioned song, California Uber Alles by the Dead Kennedys, which celebrates/mocks the former governor Brown. Despite accusing him of jogging for the master race, poisoning with organic poison gas, and forcing meditation i schools, I'm sure Jello Biafra nevertheless appreciates AG Brown's efforts to keep Californians safe from killer corporations:

Iowa and trade... it's the prices, stupid

The Wall Street Journal has a pretty fair front page story by Greg Hitt and Deborah Solomon this morning talking about the role that trade is playing in the Iowa caucuses. It shows how Clinton, Edwards, Huckabee, Obama and even John McCain are talking about fair trade policies in their appeals to voters. But many of the commentators don't get it:

Iowa's ambivalence is all the more remarkable because the state is on the whole a big winner from global trade. "Iowa, as much as any other state, is on the plus side of the ledger," says James Leach, a 30-year Republican congressman from Iowa who now runs Harvard University's Institute of Politics...

By many measures, the global economy has been good for the state. Boosted by the ethanol and biofuels craze and surging demand for crops and farm equipment world-wide, Iowa's exports are up 77% over the past four years versus 50% nationally. The state's unemployment rate hovers around 3.7%, below the national 4.6% average...

"It's unfortunate that the Democrats are willing to describe trade as part of the problem," says Robert Reich, President Clinton's labor secretary... "It's pandering to a misconception in the public. The truth is that trade is good for the U.S. but that some people are burdened by it far more than others."

That was your former elected farm state representative and labor secretary, folks - two people that should know about the price of corn, soybeans and labor. While the volume of U.S. corn and soybean exported increased as predicted by NAFTA’s proponents, the prices received by American farmers declined to the lowest levels in recent memory. While American farmers received $12.64 per bushel of soybeans (in inflation-adjusted terms) when the NAFTA predecessor Canada FTA went into place in 1988, that price halved to $6.30 by 2006. In inflation-adjusted dollars, farmers received $4.29 a bushel for corn in 1995, the year the WTO went into effect and a year after NAFTA went into effect. But a decade later in 2005, the bushel price was at a low of $2.06, and only started increasing with the recent ethanol boom  – a development that is threatened with derailment as Brazil and other agricultural exporters plot WTO challenges against U.S. corn ethanol subsidies. 

And average and median wages, as regular readers of Eyes on Trade know, have barely budged from their 1973 levels, despite a doubling of productivity. It's not a question of compensating a few losers. MOST people, who are wage earners, are net losers from our current trade policy. (The unemployment level, mentioned in the article, is pretty irrelevant, since that is driven by interest rates. It's the composition of jobs (i.e. manufacturing v. services) that is affected by trade.) Nobody serious says that trade does not play a major if not the leading role in this. So when Reich derides candidates that "are willing to describe trade as part of the problem," that's about the least they can do in their sometimes tenuous loyalty to reality. In fact, many quoted in the article say this:

• Gene Sperling, adviser to Clinton: "Even those of us who are supportive of the open-market policies of the '90s to take seriously that the large inflow of workers from China and India digesting American jobs is placing downward pressure on wages."
• Leo Hindery, advisor to Edwards: "My sense is that the families of Iowa have now concluded that the modest benefit to them from cheaper goods that flow through Wal-Mart have been overwhelmed by stagnating wages."

Besides these points, there was an odd comment that deserves flagging:

Most economists argue that changing technology is more to blame for the divergence of economic fortunes. Nonetheless, worker concerns are roiling the political landscape. "Everywhere you go you've got this widespread feeling, especially in the labor community, that all of the wage problems of the middle class are due to trade," says Austan Goolsbee, a University of Chicago economist advising Democratic candidate Sen. Barack Obama.

Actually, as a paper for the Federal Reserve Bank of Atlanta (no bastion of labor they) pointed out several years ago, the argument that skill-biased technological change (rather than other factors) is driving rising inequality is a pretty weak one, for among other reasons, because inequality began its rise in the late 1970s-early 1980s, while the workplace computer revolution didn't happen until the 1990s. That's just the most straightforward example; there are many more in the paper.

Oh, and for the record, and we'll be posting this on all election related posts:

Disclosure: Global Trade Watch has no preference among the candidates.

Enclave Economy v. Straw Men

My friend Kevin Gallagher of Boston University has a new book out from MIT Press with Lyuba Zarsky called "The Enclave Economy: Foreign Investment and Sustainable Development in Mexico's Silicon Valley."

Unlike a lot of the Friedman-ite platitudes about eating sushi with a Bengali venture capitalist while talking on a cell phone, Kevin and Lyuba actually bothered to go to Mexico and talk to businesspeople and others to learn about the impact that NAFTA has had on Mexico's peoples and policies. Their major case study is Mexico's IT industry, and how it stacks up against its counterparts in Asia and elsewhere.

The picture they paint is not pretty. Under Mexico's pre-NAFTA import substitution regime, the country was able to produce a wide variety of electronics, and at one point nearly 95% of the value-added content of television production. In the 1970s, the government laid out a comprehensive policy to build a domestic computer industry, including by limiting foreign ownership and requiring that firms source nationally and locally. Deemed "an extraordinary success," the program began to unravel and domestic firms began to disappear. First when NAFTA facilitate the massive move-in of multinational companies with less long-term investment in the region, but instead only a temporary commitment to take advantage of low wages. And second when the multinationals traded out Mexico's less than $3-an-hour wages with China's less-than-$1-an-hour wages when that country acceded to the WTO in 2001 and also decided to let footloose capital set up shop without committing to China either.

Why did this happen? Kevin and Lyuba find plenty of blame to go around, but a major culprit is flawed trade deals like NAFTA, which "constrict the scope for developing countries to undertake targeted industrial policies":

Rules on intellectual property rights, for example, make it difficult to develop comprehensive innovation policies. Investment rules outlaw the ability of developing countries to leverage concessions from foreign firms such as content requirements for local suppliers or support for local training. Investment rules also allow private foreign firms to sue national governments when new and un-anticipated (by the investing firms) social and environmental  cut into profits under the argument that such regulations are "tantamount to expropriation." Moreover, the macroeconomic policies need to support contemporary trade agreements - high interest rates and tight fiscal policies - also make it more difficult for governments to design effective policy and offer credit to domestic firms.

Kevin and Lyuba have a summary piece of their book over at IRC.

Contrast this with some other stuff floating around DC recently.

Hawai'i Legislature Beats Back GOP Governor Veto on Key Fair Trade Bill!

Yesterday, the Hawai'i legislature overrode Gov. Lingle's veto of HB 30 to establish that only the legislature has the authority to approve or reject the procurement terms of international trade agreements. This makes Hawai'i the third state after Maryland and Rhode Island (both of which also overrode Republican governors' vetoes) to pass this cutting-edge legislation!

This has been a long battle for Hawai'i - they passed a similar bill last year that was also vetoed, and this year the governor's office has been at war with the legislature over the bill (and many others - Lingle vetoed 27 bills!). The lieutenant governor put out an op-ed in the Honolulu Advertiser (sorry, not linkable) claiming the bill would be "restrictive and damaging to Hawai’i’s economy” and would “improperly curtail the executive authority of the governor.” Despite the use of these scare tactics, the Hawai'i legislature passed the bill in May and overrode the governor's veto in a special session on July 10th.

Procurement is just one aspect of the many terms of "trade" agreements that have nothing to do with trade. Many common state policies, such as laws to prevent the offshoring of jobs, "Buy Local" or "Buy America" policies and preferences for renewable energy or recycled content, are threatened by the procurement terms of NAFTA-style trade agreements. These constraints on state regulatory authority undermine state sovereignty and our system of federalism. Luckily for Hawai'i, the legislature can now practice its democratic rights over procurement policy.

The Hawai'i State House has also passed a resolution calling for Fast Track replacement earlier this year. With Fast Track now dead and buried, Hawai'i is leading the demand from states around the country for a new direction in trade.

Read our full press release after the jump.

Wisconsin Senate Calls for New Era in Trade Policy

As Fast Track expires this week, the Wisconsin State Senate passed a resolution calling for a replacement of the outdated mechanism with a new process that includes state consultation. This resolution becomes the thirteenth such that has passed, echoing the widespread desire for change in our failed trade policy from state officials and the rest of the country.

In a press release from State Senator Hansen's office, Sen. Hansen calls on Congress to listen to the peoples' demands:

"The 2006 elections turned on issues of importance to working people. Foremost among these issues was trade. The workers and farmers of this state and nation can't stand for these corporate trade deals any longer and they've made their opinions clear."

Pelosi's district calls on her to replace Fast Track

Last week, the San Francisco Board of Supervisors joined the dozen other state and local authorities around the country and unanimously passed a resolution (PDF) calling on Speaker Pelosi to replace Fast Track. The resolution also blasts the

"recent failure of the House leadership to consult other members of Congress, state and local policymakers, and key constituency groups before announcing the conclusion of negotiations with the Bush administration.."

Read the Green Party of California's Press Release on the resolution here.

More action from Maine

Maine has been taking the lead on reforming our failed trade policy on all fronts — through anti-Fast Track resolutions, sweat-free consortiums, and now economic impact studies. This week, Maine became the first state in the nation to pass legislation requiring economic impact studies of big-box projects before they are approved. LD 1810 requires cities and towns to evaluate the impact of big-box retail development on jobs, local businesses and municipal finances. These projects can only be approved if they will not adversely affect the local economy, which doesn't bode well for mega-retailers like Wal-Mart, which has lobbied the USTR (PDF) against some of these proposals.

In a press release from the Maine Fair Trade Campaign, Stacy Mitchell of the Institute for Local Self-Reliance says:

"Too often communities must decide whether to approve big-box development without any objective information about the impact on the local economy. Maine is leading the nation by giving towns a tool for weighing the costs and benefits."

These initiatives have been proposed in several states, and the California state legislature passed a similar bill twice, which Gov. Schwarzenegger vetoed in 2004 and again in 2006 (PDF). Laws requiring economic needs tests before approving big-box stores are just among some of the local zoning laws that could be potential threats under GATS rules. Luckily, Maine isn't succumbing to the chilling effect.

To find out more about this topic, check out our "Big Box Backlash" report on the WTO's threat to local zoning laws.