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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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October 17, 2014

A Trade Storm Is Brewing

At the beginning of the year, we warned you about the upcoming trade tsunami. Well hold on to your hats everyone, because another “trade” storm is heading our way.

Trans-Pacific Partnership (TPP) negotiators are meeting in Australia this month and are aiming to finish the massive 12-country “trade” agreement.

Despite mounting evidence that the TPP should not be completed — including the leak of another part of the top-secret text earlier this week — President Barack Obama wants the TPP done by November 11. That is when he will be meeting with other TPP-country heads of state in China at the Asia-Pacific Economic Conference.

With the TPP’s threats to food safety, Internet freedom, affordable medicine prices, financial regulations, anti-fracking policies, and more, it’s hard to overstate the damage this deal would have on our everyday lives.

But the TPP isn’t the only threat we currently face. We are also up against the TPP’s equally ugly step-sisters: TAFTA and TISA. And Obama wants to revive the undemocratic, Nixon-era Fast Track trade authority that would railroad all three pacts through Congress.

The Trans-Atlantic Free Trade Agreement (TAFTA) is not yet as far along as the TPP, but TAFTA negotiations recently took place in Washington, D.C., and more are set for a few weeks from now in Brussels. The largest U.S. and EU corporations have been pushing for TAFTA since the 1990s. Their goal is to use the agreement to weaken the strongest food safety and GMO labeling rules, consumer privacy protections, hazardous chemicals restrictions and more on either side of the Atlantic. They call this “harmonizing” regulations across the Atlantic. But really it would mean imposing a lowest common denominator of consumer and environmental safeguards.

The Trade in Services Agreement (TISA) is a proposed deal among the United States and more than 20 other countries that would limit countries’ regulation of the service sector. At stake is a roll back of the improved financial regulations created after the global financial crisis; limits on energy, transportation other policies needed to combat the climate crisis; and privatization of public services — from water utilities and government healthcare programs to aspects of public education.

TPP, TAFTA and TISA represent the next generation of corporate-driven “trade” deals. Ramming these dangerous deals through Congress is also Obama’s impetus to push for Fast Track. Fast Track gives Congress’ constitutional authority over trade to the president, allowing him to sign a trade deal before Congress votes on it and then railroad the deal through Congress in 90 days with limited debate and no amendments. Obama opposed Fast Track as a candidate. But now he is seeking to revive this dangerous procedural gimmick.

Because of your great work, we’ve managed to fend off Fast Track so far. This time last year, the U.S. House of Representatives released a flurry of letters showing opposition to Fast Track from most Democrats, and a wide swath of Republicans. This is something the other side was not expecting, and they were shocked. We won that round, but Obama and the corporate lobby are getting ready for the final push.

Because Fast Track is so unpopular in the House, Speaker John Boehner has a devious plan to force the bill through Congress in the “lame duck” session after the November elections. We need to make sure our “ducks” are in a row before that.

Some members of Congress are working on a replacement for Fast Track. U.S. Sen. Ron Wyden (D-Ore.) says he will create what he calls “Smart Track.” It is not yet clear if this will be the real Fast Track replacement we so desperately need, or just another Fast Track in disguise.

Sen. Wyden will want to be ready to introduce his Smart Track bill right as the new Congress starts in January 2015. This means we have only a couple of months left to make sure his replacement guarantees Congress a steering wheel and an emergency brake for runaway “trade” deals.

With all these deadlines drawing near, it’s clear that a knock-down, drag-out fight is imminent. But we will be ready. The TPP missed deadlines for completion in 2011, 2012, and 2013 — if we keep up the pressure, we can add 2014 to that list as well. That’s why there will be a TPP/TAFTA/TISA international week of action Nov 8-14 — more details coming soon!

October 07, 2014

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

October 02, 2014

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

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

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

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

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

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

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

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

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

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

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

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

Read the report.

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)" »

September 12, 2014

Sachs on TPP: "This is a NAFTA Treaty Writ Large"

"These are largely industry- and lobby-driven activities. They are not yet in any way proved to be in the interest of American people, and this is a matter of significant concern.  I don’t understand how something of such vast significance for billions of people could even presume to be treated in this manner." 

That's the take on the controversial Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA) from Jeffrey Sachs -- prominent economist, Columbia University professor, and Earth Institute director.

Prof. Sachs lambasted the proposed deals on Wednesday at a Forum on Free Trade Agreements, hosted by Congresswoman Rosa DeLauro. Other speakers who criticized the pacts and called for a new trade agreement model included Maine Attorney General Janet Mills, K.J. Hertz of AARP, Jared Bernstein of the Center on Budget and Policy Priorities, Thea Lee of the AFL-CIO, and Debbie Barker of the Center for Food Safety.  

Check out this video of their incisive critiques of hte TPP and TAFTA.  Excerpts from Prof. Sachs' remarks follow. 

  

 Excerpts from Prof. Jeffrey Sachs on the TPP and TAFTA (also known as TTIP)

TRANSPARENCY: The fact that the public is not engaged means that we should worry because we do know that when things are managed in secret, as these negotiations have been, it’s the organized and powerful interests that by far dominate the proceedings. These are largely industry- and lobby-driven activities. They are not yet in any way proved to be in the interest of American people, and this is a matter of significant concern.  I don’t understand how something of such vast significance for billions of people could even presume to be treated in this manner. One could imagine that negotiations over very specific tariff rates or very specific numerical clauses in some of these chapters could be held privately. But the idea that the main text around issues as broad as investor protection, dispute settlement, taxation, financial flows, intellectual property, would be done secretly, is shocking actually to me. But we’re talking about the basic rules of the international economy for the three major regions of the world. There is no reason in the world I can see for this text not to be public, not to be publically vetted, and not to be updated over time.

WRONG TRADE AGREEMENT MODEL: [W]hen President Obama talks about TPP and TTIP being 21st century trade agreements, the starting point should be that the phenomena of globalization more generally, the extent of financial crises, the growing environmental catastrophe worldwide of climate change and loss of biodiversity, the crises of international disease (such as we now have with Ebola in West Africa) need to be not only considered as footnotes. And they’re not even that in any way. They need to be in the forefront of our international economic relations…And in that sense I can’t support either of these negotiations with what I see now. I think that they would distract us from the more important global issues. I don’t think they rise close to the standard of being 21st century trade and investment agreements, not even close. They are very much 20th century agreements which were already out of date by the time they were negotiated. This is a NAFTA treaty writ large, or this is the same negotiation that we’ve had in many other cases.

TPP AND TTIP AS INVESTEMT PROTECTION AGREEMENTS, NOT TRADE PACTS: [T]these proposed agreements are mostly investor protection agreements, rather than trade agreements. There are trade elements in them, but this is mostly about investor protection: investor protection of property rights of investors, of prerogatives of investors, of IP of investors, of the regulatory environment of investors, and so forth. Recognizing that, we have some reasons to support some of these issues, but a lot of reasons for worry, because it’s not true that everything that is in the investor’s interest is in the worker’s interest. Its’ not true that everything that’s in the investor’s interest is in the broad interest of the American people or the people in host countries where the American investment may be going, or in the same way, investment that could be coming into this country. So we’re talking about mainly investment rules. And trade, which is already quite liberalized in the straightforward trade manner, doesn’t change all that much from what we know of these treaties. These are basically not trade agreements. They are investment agreements.

INVESTOR-STATE: [T]he whole issue of investor-state dispute settlement:  to my mind, it is quite alarming that the administration seems until this day to be pushing something which more and more observers, participants, legal scholars view as out of control…And the problem with this is that it creates an extra-legal venue for arbitration that has proven in many investment treaties in recent years to be highly deleterious for basic government regulatory processes and especially around issues of health, safety, environment, and other issues. The mechanism proposed here which is already part of many bilateral treaties and some multilateral investment treaties — is giving more and more power to investors to challenge general government regulatory actions. Not breach of specific investment contracts, but general regulatory and legislative actions on the claim that those general regulatory or legislative actions are against the interests of the investors and somehow therefore violate the implicit standards or guarantees that these investors have vis-à-vis the host countries. In other words, standards of general applicability against smoking or for environmental protection, or for taxation of natural resources and so forth are now coming under challenge in these investor-state dispute arbitration panels and forcing governments — the host governments — to back down or rescind or, in the face of a lost arbitration, to cancel laws of general applicability, and therefore to lose the sovereign right to pursue national interest at the face of investor interest. …As far as I know the United States government continues to press this clause today.  I regard that alone as reason to oppose both of these treaties. If this remains in place, it is absolutely in the wrong direction. And, these clauses have proven to be increasingly dangerous and I’ve seen publicly no response to this at all. 

July 10, 2014

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

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

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

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

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

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

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

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

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

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

May 30, 2014

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

February 19, 2014

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

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

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

1. Access to affordable medicines

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

2. Income inequality

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

3. Internet freedom

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

4. Corporate trade advisors

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

5. Fast Track

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

6. Currency manipulation

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

7. Labor rights

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

8. Environmental protection

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

9. TPP secrecy

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

10. Exports under FTAs

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

January 10, 2014

Camp-Baucus Bill Would Revive Controversial 2002 Fast Track Mechanism

The Camp-Baucus Fast Track bill released yesterday replicates the procedures included in the 2002 grant of Fast Track that expired in 2007:

  • The president would be empowered to unilaterally select trade negotiating partners and commence negotiations. Like the 2002 Fast Track, in the Camp-Baucus bill this authority is conditioned only on pro forma consultations and 90 calendar days’ notice being given to Congress before negotiations begin. The Camp-Baucus bill provides no mechanism for Congress to veto a president’s decision to enter into negotiations on a trade pact that would be subject to expedited floor procedures, nor any role in selecting with which countries such pacts are initiated. (Sec. 5(a))
  • The president would be empowered to unilaterally control the contents of an agreement. As with the 2002 Fast Track, congressional negotiating objectives in the Camp-Baucus bill are not enforceable. Whether or not U.S. negotiators obtain the listed negotiating objectives, the Camp-Baucus bill would empower the president to sign a trade pact before Congress votes on it, with a guarantee that the executive branch could write legislation to implement the pact and obtain House and Senate votes within 90 days, with all amendments forbidden and a maximum of 20 hours of debate permitted. (Sec. 3(b)(3))
  • The president would be authorized to sign and enter into an agreement subject to expedited consideration conditioned only on pro forma consultations and providing Congress 90 calendar days’ notice prior to doing so. (Sec. 6(a)(1)) The executive branch alone would determine when negotiations are “complete.” The congressional “consultation” mechanisms in the Camp-Baucus bill do not provide Congress with any authority or mechanism to formally dispute whether negotiations have indeed met Congress’ goals and thus are complete, much less any means for Congress to certify that its objectives were met before an agreement may be signed.
  • The president would be authorized to write expansive implementing legislation and submit it for consideration. (Sec. 6(a)(1)(C)) As with the 2002 Fast Track, such legislation would not be subject to congressional committee markup and amendment. The 2002 Fast Track states that this legislation can include any changes to U.S. law that the president deems “necessary or appropriate to implement such trade agreement or agreements.” (19 USC 3803(b)(3)(B)(ii)) Inclusion of the term “appropriate” in this section of past Fast Track authorities has been controversial, because it provides enormous discretion for the executive branch to include changes to existing U.S. law that Congress may or may not deem necessary to implement an agreement. Indeed, inclusion of the term “appropriate” has enabled Democratic and GOP administrations alike to insert extraneous changes to U.S. law into legislation that skirts committee mark up and is not subject to floor amendment. Rather than remove the term “appropriate,” the Camp-Baucus bill merely adds the superfluous modifier “strictly” in front of the same “necessary or appropriate” language found in the 2002 Fast Track. (Sec. 3(b)(3(B)ii)) As with the 2002 Fast Track, there is no point of order or other mechanism to challenge inclusion of overreaching provisions in the implementing bill.
  • Like the 2002 Fast Track, the Camp-Baucus bill would require the House to vote on such legislation within 60 session days, with the Senate having an additional 30 days to vote thereafter. (Sec. 3(b)(3))
  • Like the 2002 Fast Track, the Camp-Baucus bill would forbid all amendments and permit only 20 hours of debate on such legislation in the House and Senate. Voting, including in the Senate, would be by simple majority. (Sec. 3(b)(3))
  • The Camp-Baucus bill replicates the 2002 Fast Track with respect to limitations that could be placed on the application of the Fast Track process to a specific trade agreement. While the factsheet on the bill released by the Finance Committee suggests that it includes a “strong, comprehensive” disapproval process, in fact it replicates the 2002 Fast Track’s limited grounds for which a resolution to disapprove Fast Track can be offered. The Camp-Baucus bill also replicates the 2002 Fast Track’s procedures for consideration of such a resolution, which curtail the prospect that such a resolution would ever receive a vote. To obtain floor action, a resolution would have to be approved by the Ways and Means and Finance committees, and then the House and Senate would have to both pass the resolution within a 60-day period. (Sec. 6(b))

The Camp-Baucus bill includes several negotiating objectives not found in the 2002 Fast Track. However, the Fast Track process that this legislation would reestablish ensures that these objectives are entirely unenforceable: 

  • In addition, some of the Camp-Baucus bill negotiating objectives advertised as “new” are in fact referenced in the 2002 Fast Track. For example, the 2002 Fast Track included currency measures: “seek to establish consultative mechanisms among parties to trade agreements to examine the trade consequences of significant and unanticipated currency movements and to scrutinize whether a foreign government engaged in a pattern of manipulating its currency to promote a competitive advantage in international trade.” (19 USC 3802(c)(12)) The so-called “new” text in the Camp-Baucus bill is: “The principal negotiating objective of the United States with respect to currency practices is that parties to a trade agreement with the United States avoid manipulating exchange rates in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage over other parties to the agreement, such as through cooperative mechanisms, enforceable rules, reporting, monitoring, transparency, or other means, as appropriate.” (Sec. 2(b)(11))

What is touted as “enhanced coordination with Congress” is actually the mere renaming of the Congressional Oversight Group from the 2002 Fast Track as “Congressional Advisory Groups on Negotiations,” while provisions ostensibly improving transparency merely formalize past practice:

  • The 2002 Fast Track established a Congressional Oversight Group (COG) comprised of members of Congress appointed by congressional leaders who were to obtain special briefings from the U.S. Trade Representative’s (USTR) office on the status of negotiations and to attend negotiations on an advisory basis. The Camp-Baucus bill renames the COG – delineating a “House Advisory Group on Negotiations” and a “Senate Advisory Group on Negotiations” and describing joint activities of the two – but includes the same appointment process and limited role for  congressional trade advisory groups as found in the 2002 Fast Track. (Sec. 4(c))
  • The Camp-Baucus bill instructs USTR to write guidelines for its consultations with Congress, the public and private sector advisory groups. In effect, this provision merely requires USTR to put into writing how it will (or will not) relate to these interested parties. (e.g. Sec. 4(a)(3) and Sec. 4(d)(1))
  • The Camp-Baucus bill simply formalizes the past practices of USTR by requiring that any member of Congress be provided access to trade agreement documents. For instance, during NAFTA negotiations, members of Congress had open access to the full draft NAFTA texts with a new version placed into a secure reading room in the U.S. Capitol after each round of negotiations. In the summer of 2013, the Obama administration finally responded to growing pressure by members of Congress for access to draft TPP texts by bringing requested specific chapters to members’ offices for review when a member asked for such access. Rather than specifying that USTR must resume the practice of providing standing access for members of Congress to full draft trade agreement texts, the Camp-Baucus bill leaves to the discretion of USTR how it will provide text access to members of Congress if a member requests access. (Sec. 4(a)(1)(B))
  • The Camp-Baucus bill also replicates the problematic language of the 2002 Fast Track that limits access to confidential trade agreement proposals and draft texts for congressional staff with the necessary security clearances to only committee staff, excluding personal staff with clearances. (Sec. 4(a)(3)(B)(ii))

The Camp-Baucus bill faces long odds for approval in the 113th Congress:

  • With a large bloc of House Democrats and Republicans already having announced opposition to the old Fast Track process at the heart of Camp-Baucus bill, the prospects are limited for the Obama administration to secure passage in the first half of 2014 before lawmakers’ attention turns to midterm elections.
    • A letter sent to President Obama in November by 151 Democrats opposed Fast Track authority and called for the creation of a new mechanism for trade agreement negotiations and approval.
    • Twenty-seven Republicans have also announced their opposition to Fast Track in two letters to Obama.
    • Most Democratic Ways and Means Committee members joined an additional letter in November noting that the old Fast Track process enjoys little support.
  • Even after repeated delays in introduction, the Camp-Baucus Fast Track bill failed to gain a House Democratic cosponsor. Ways and Means Ranking Member Sandy Levin (D-Mich.) has announced that he does not support the Camp-Baucus bill. Levin’s demands for changes to the 2002 Fast Track procedure to enhance Congress’ role in determining the contents of trade pacts were rebuffed by Ways and Means Committee Chair Dave Camp (R-Mich.), Finance Committee Chair Max Baucus (D-Mont.) and Finance Committee Ranking Member Orrin Hatch (R-Utah).
  • The Camp-Baucus Fast Track grandfathers in the Trans-Pacific Partnership (TPP) and U.S.-EU Trans-Atlantic Free Trade Agreement (TAFTA) negotiations. (Sec. 7) Fast Track for the TPP and TAFTA is especially controversial because these pacts would include chapters on patents, copyright, financial regulation, energy policy, procurement, food safety and more, constraining the policies that Congress and state legislatures could maintain or establish on these sensitive non-trade matters. Fast Track was designed in the 1970s when trade negotiations were narrowly focused on cutting tariffs and quotas, not the sweeping range of non-trade policies implicated by today’s pacts.

Fast Track is an anomaly. It has only been in effect for five of the past 19 years:

  • Both Democratic and GOP presidents have struggled to convince Congress to delegate its constitutional trade authority via the Nixon-era Fast Track scheme. Fast Track has been in effect for only five years (2002-2007) of the 19 years since passage of NAFTA and the agreement that created the WTO.
  • A two-year effort by President Bill Clinton to obtain Fast Track trade authority during his second term in office was voted down on the House floor in 1998 when 171 Democrats were joined by 71 GOP members who bucked then-Speaker Newt Gingrich. Clinton did not have Fast Track for six of his eight years in office, but still implemented more than 130 trade agreements.
  • President George W. Bush spent two years and extraordinary political capital to obtain the 2002-2007 Fast Track grant, which passed a Republican-controlled House by one vote, and expired in 2007. 

December 21, 2013

Get Ready for the 2014 Trade Tsunami

Hard work, smart planning and perseverance made 2013 a year of inspiring fair-trade activism. 

Vibrant grassroots activism and dogged D.C. advocacy resulted in a new level of public and congressional concern about the perils of Fast Track and the Trans-Pacific Partnership (TPP). In November, three of every four Democrats – and a remarkable number of Republicans – publicly stated their opposition to Fast Track trade authority. The extreme procedure is seen as critical by TPP’s corporate boosters because it could railroad the TPP through Congress despite growing concerns about many aspects of the pact.

And, thanks to civil society pressure in Asia and Latin America, the other TPP country governments did not give in to all of the U.S. corporate-inspired demands for medicine monopolies, financial deregulation and expanded corporate investor tribunals in the TPP. As a result, the Obama administration failed to wrap up TPP negotiations in Singapore this month, missing yet another do-or-die, self-imposed deadline for the deal. 

This sets the stage for the most important U.S. political and policy fights on globalization and “trade” in decades, beginning in a few short weeks. The stakes couldn’t be higher.

In the first months of 2014, Congress will decide whether it will maintain its constitutional authority over trade or succumb to White House and corporate demands to give away its power to save us from more damaging “trade” deals.

This week, the Obama administration announced that top priorities for 2014 will be to sign the massive, dangerous TPP it has been negotiating for four years and extract Fast Track trade authority from Congress. The extreme Nixon-era Fast Track procedure would allow the TPP and a Trans-Atlantic Free Trade Agreement (TAFTA) to be signed before Congress approves them with a guarantee that they can be railroaded through Congress with limited debate and no amendments. (TAFTA would empower the European corporations with 24,000 subsidiaries operating here to drag the U.S. government before foreign tribunals to demand taxpayer compensation for U.S. laws they claim undermine their expected future profits.)

Cue the rattling chains: in 2014 we must banish the ghosts of NAFTA, which haunt us still. 

Twenty years ago on New Years’ Day, the North American Free Trade Agreement (NAFTA) went into effect. The World Trade Organization (WTO) opened shop a year later. Unlike past trade pacts, which dealt mainly with cutting tariffs, these agreements included investment rules that incentivized the “offshoring” of American jobs, ushering in a new era of growing U.S. trade deficits. These pacts also granted corporations new powers that raised medicine prices and limited food safety and financial regulation.

Yet despite NAFTA’s devastating track record and the U.S. loss of five million manufacturing jobs since its advent, the White House has decided to double-down on a failed economic experiment. In the TPP and TAFTA, Obama has taken the NAFTA model, injected it with steroids, and invited scores more countries to sign on.

Although there are powerful, deep-pocketed, international forces that will use everything at their disposal to get the trade deals passed, there is hope – and opportunity – for those of us who want to defeat them. 

The fiery international debates over NAFTA and WTO gave birth to a new fair trade movement in our country.  The devastating outcomes triggered by the trade pacts unified ordinary Americans against them. Polls show a majority of Americans – Republicans, Democrats and independents –think these sorts of pacts are bad not only for themselves and their families but for the nation.

And, the harsh lessons of NAFTA were learned worldwide. This certainly contributed to the other TPP countries’ concerns about the NAFTA-on-steroids proposals in the TPP.

But we face a race against time. Will growing public opposition to the TPP in Asian and Latin American countries overcome what President Obama heartbreakingly announced this week will be his new personal effort to seal the deal in the first months of 2014?

Continue reading "Get Ready for the 2014 Trade Tsunami" »

December 20, 2013

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

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

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

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

Empowering Foreign Corporations to Directly Attack Public Protections

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

This extreme “investor-state” system already has been included in U.S. “free trade” agreements, forcing taxpayers to pay firms more than $400 million for toxics bans, land-use rules, regulatory permits, and water and timber policies. Just under U.S. pacts, more than $14 billion remains pending in corporate claims against medicine patent policies, pollution cleanup requirements, climate and energy laws, and other public interest polices.

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

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

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

December 19, 2013

Monsanto’s Plan B: A Backdoor to Genetically Modified Food

One week ago, the governor of Connecticut signed into law the country's second genetically modified organism (GMO) labeling policy, following one approved in Maine (both require adoption of GMO labeling laws in neighboring states to take effect). The movement demanding the right to know when food is genetically modified has gained steam recently, pushing more than half of U.S. states to consider labeling initiatives. As Connecticut Governor Malloy stated upon signing last week's bill, "This is not a movement you are going to stop."

But that doesn't mean that the likes of Monsanto aren't trying.  The latest tool sought by GMO corporations to ensure unimpeded and unlabeled production and consumption of GMO products is a sweeping "trade" deal under negotiation this week between the U.S. and the European Union.  A “trade” deal only in name, the Trans-Atlantic Free Trade Agreement (TAFTA) would require the United States and EU to conform domestic financial laws and regulations, climate policies, food and product safety standards, data privacy protections and other non-trade policies to TAFTA rules.

We profiled recently the top ten threats this deal poses to U.S. consumers.  Here's how TAFTA could threaten GMO limits and labels.   

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

U.S. and EU TAFTA negotiators, advised by the world’s largest agribusinesses, have used coded language in pushing for TAFTA rules that could chill attempts to label food containing GMOs and government approvals of GMO seeds and cultivation of GMO crops. A majority of European consumers and a plurality of U.S. consumers are concerned about the impacts of genetically modified food and crops on human health and the environment.

The EU requires GMO seed approvals that are based on the precautionary principle – that in the face of uncertainty about a product’s safety for consumers or the environment, policies must seek to avoid exposure to risk. Governments have long relied on this principle to shield their populations from uncertain risks from new or emerging products. The U.S. drug safety system is based on the precautionary principle. Thus, drugs must be proved safe before they are permitted on the U.S. market. As a result, the United States did not allow sale of the morning sickness drug Thalidomide in the 1960s, which prevented a generation of children from being born with severe birth defects. In countries where medicines were allowed on the market before being proved safe, thousands of “thalidomide babies” were born.  

The EU GMO approval policy requires that a seed/crop must be assessed for its consumer health and environmental implications before it can be marketed. Moreover, EU member countries maintain the authority to altogether ban cultivation of GMOs, which nine nations have done. In addition, the EU and an increasing number of U.S. states have responded to consumers’ demands for GMO labels that allow people to choose whether or not to consume GMO foods.

However, U.S. and EU negotiators are now proposing TAFTA rules that could undermine both precautionary principle-based approvals for GMO seeds and cultivation and GMO labeling. U.S. negotiators have stated that TAFTA should “seek to eliminate or reduce non-tariff barriers…such as sanitary and phytosanitary (SPS) restrictions that are not based on science.” Translated out of trade jargon, this means that instead of agribusinesses being required to prove that a GMO seed does not pose a threat before it can be sold, limits on GMO seeds or cultivation would only be permitted under TAFTA rules if governments can show that there is scientific evidence of a specific threat to human, animal or plant life. Not only would this endanger the EU GMO approval process, but it would directly undermine the current rights of EU member states to ban cultivation of GMOs.

Continue reading "Monsanto’s Plan B: A Backdoor to Genetically Modified Food" »

December 18, 2013

TAFTA Studies Project Tiny Economic Gains, Assume No Costs from Gutting Safeguards

Over the last several days we've highlighted the threats that a new U.S.-EU "trade" deal, under negotiation this week, could pose to food safety, financial stability, and efforts to rein in climate change.  A “trade” deal only in name, the Trans-Atlantic Free Trade Agreement (TAFTA) would require the United States and EU to conform domestic financial laws and regulations, climate policies, food and product safety standards, data privacy protections and other non-trade policies to TAFTA rules.

To sell such a dramatic rewrite of domestic safeguards to U.S. and EU policymakers and the general public, corporate lobby groups and TAFTA negotiators contend that the deal would bring economic benefits. TAFTA’s corporate proponents repeatedly point to a few theoretical studies to justify claims of increased national income resulting from the deal.

These studies use many dubious assumptions, questioned by economists at institutions such as the UN, to project TAFTA’s economic impact. Similar studies, when used for prior pacts, have produced vastly inaccurate predictions of gains. But even if one accepts all such assumptions regardless of their basis in reality, the studies project negligible economic “benefits” from TAFTA. Meanwhile, they ignore TAFTA’s likely costs to consumers, workers and the environment, despite the abundant evidence of such costs resulting from prior pacts.

Pro-TAFTA Study Projects Trade “Benefit” of Three Cents per Day

A standard argument for “free trade” agreements is that such deals reduce tariffs, thereby expanding trade, and that the benefit to all from access to cheaper imports outweighs the damage to those who lose their jobs. But tariffs between the United States and the EU are “already quite low,” as acknowledged by the U.S. Trade Representative. The EU and U.S. officials promoting TAFTA have readily stated that TAFTA’s primary goal is not tariff reduction, but the “elimination, reduction, or prevention of unnecessary ‘behind the border’” policies, such as domestic financial regulations, climate policies, food safety standards and product safety rules. 

That is why studies focused on the impact of TAFTA’s possible tariff reduction have produced meager estimates of any economic impact. Under the most optimistic scenario envisioned by a frequently cited pro-TAFTA study by the European Centre for International Political Economy, TAFTA tariff reductions would result in an estimated 1 percent increase in U.S. gross domestic product (GDP). But that estimate is unrealistically high, given that it assumes a contentious proposition of tariff reductions causing strong “dynamic” economic growth, a dubious theory at best. Noted academics have repeatedly cited empirical evidence showing no such trade-growth causation.  By omitting this assumption, the study notes that the theoretical TAFTA-prompted increase in U.S. GDP of $182 billion drops to just $20.5 billion, a 0.1 percent blip in what is projected to be an $18.3 trillion U.S. economy in the assumed year of TAFTA implementation. By comparison, economists estimate that the introduction of the fifth version of Apple’s iPhone delivered a GDP increase up to five times higher than the projected TAFTA effect.

TAFTA’s trivial trade impact shrinks even further when considering what the deal would mean in terms of actual income. The pro-TAFTA study projects that total annual U.S. national income would be just $4.6 billion higher under the deal. Even this number is unrealistic, given that it assumes that 100 percent of existing tariffs between the EU and the U.S. would be fully eliminated under the deal, an unlikely scenario given that the EU has already stated that sensitive products should be afforded exemptions from tariff reductions.  But proceeding with this inflated figure still results in deflated “benefits.” After adjusting for inflation and population growth in the years before the pact would be fully implemented, the projected $4.6 billion boost would amount to an extra three cents per person per day

Studies Ignore Costs, Use Big Assumptions to Project Tiny Gains from Weakened Safeguards

Several other studies touted by pro-TAFTA officials and industry associations focus not on the reduction of tariffs but on the deal’s central goal of reducing health, financial, environmental and other public interest regulations that have been euphemistically renamed “non-tariff barriers” or “trade irritants.” Leaked EU position papers reveal that TAFTA could include obligations for products and services that do not comply with such domestic safeguards to be allowed under processes called “equivalence” and “mutual recognition,” or obligations to actually alter domestic U.S. and EU policies to conform to new trans-Atlantic standards negotiated to be more convenient to business.  

Pro-TAFTA studies ignore the proven costs of such safeguard weakening while employing models based on the unproven business mantra that curtailing health, safety and environmental regulations would produce economic benefits for everyone. Despite such lopsided calculations, the studies still produce meager projections for TAFTA’s economic gains. An oft-cited pro-TAFTA study, commissioned by the European Commission and prepared by the Centre for Economic Policy Research, estimates that, if public interest regulations are significantly diluted or eliminated, TAFTA could produce a 0.2 – 0.4 percent increase in U.S. GDP (a $66 – 126 billion addition in 2027).

To arrive at this estimate of a smaller TAFTA gain than was delivered by the latest iPhone, the study assumes that up to one out of every four non-tariff barriers – which, according to the study, could include Wall Street regulations, food safety standards and carbon controls – would be reduced or eliminated. (The study acknowledges that some safeguards could not reasonably be slated for dismantling because doing so “may require constitutional changes…; because there is a lack of sufficient economic benefit to support the effort;...because of consumer preferences…; or due to other political sensitivities.”) To generate projections of economic gains from such safeguard dismantling, the study employs a methodology that UN economists have criticized as inchoate and unreliable: using an assumptions-laden computable general equilibrium model to study non-tariff policies.

In addition to the social and environmental toll that would result from such a degradation of health, safety, environmental, and other public interest standards, such regulatory weakening would also result in quantifiable monetary costs for U.S. consumers and the broader economy. The study ignored such costs.

For example, in the financial sector, the study names the Sarbanes-Oxley Act of 2002 as a “non-tariff barrier” on the target list of European businesses and officials. The Act created enhanced accounting and anti-fraud standards to prevent a recurrence of the Enron, WorldCom, and other corporate accounting scandals that destroyed billions of dollars of U.S. investments. The study also lists as a barrier U.S. “regulatory capital requirements,” which limit financial firms’ ability to take on risky bets that could lead to bankruptcy and financial instability. Indeed, the EU’s top financial regulator, Michel Barnier, has repeatedly criticized proposed U.S. capital requirements for foreign-owned banks – designed to rein in the excessive risk-taking that led to the Great Recession – while calling for such Wall Street reforms to be subject to TAFTA negotiations. Undermining such critical financial reregulation via TAFTA would heighten the risk of more accounting scandals or another financial crisis, threatening dire impacts on the real economy. Such risks hardly seem worth a small, speculative blip in GDP.  

December 17, 2013

A Clean Energy Future or another Dirty Deal?

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

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

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

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

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

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

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

Corporations’ TAFTA Agenda: Deregulation without Disguise

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

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

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

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

Fast Track: Railroading Democracy to Railroad Safeguards?

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

December 16, 2013

A Deal Only Wall Street Could Love

Last week, U.S. financial regulators took a step toward reining in some of the Wall Street risk-taking that led to the financial crisis by finalizing the Volcker Rule, designed to stop banks from engaging in risky, hedge-fund-like bets for their own profit.   

But this week, EU and U.S. trade negotiators could move in the opposite direction, pursuing an agenda that could thwart such efforts to re-regulate Wall Street.  

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

We profiled recently the top ten threats this deal poses to U.S. consumers.  One area of particular concern is how TAFTA's expansive agenda implicates regulations to promote financial stability.  Here's a synopsis. 

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

U.S. and EU TAFTA negotiators, advised by Wall Street banks and EU financial conglomerates, have made clear their intent to use TAFTA to roll back the financial reforms enacted in the wake of the global financial crisis. EU negotiators have explicitly called for new “disciplines” on financial regulations to be included in TAFTA. They have listed the Volcker Rule, state-level regulation of insurance and the Federal Reserve’s proposed rules for foreign banks as particular targets for regulatory rollback. U.S. negotiators have proposed regulatory disciplines under another name: “market access” rules that simply ban many common forms of financial regulation, even if applied to domestic and foreign firms equally. The U.S. plan to include such restrictions in TAFTA conflicts with:

  • Initiatives to ban various risky financial services or products, such as certain derivatives
  • Efforts to put size limitations on banks so that they do not become “too big to fail”
  • Proposals to “firewall” different financial services (a policy tool used to limit the spread of risk across sectors, as Glass-Steagall did between commercial and investment banking)

The pact’s rules could also ban financial transaction taxes (e.g. the proposed “Robin Hood tax”) or capital controls, endorsed by the International Monetary Fund, to curb financial speculation’s destructive impact.

The Bankers’ TAFTA Agenda: Deregulation without Disguise

The European and U.S. banks, in their formal demands issued to TAFTA negotiators, have been remarkably candid in naming the specific U.S. and EU financial regulations that they would like to see dismantled via TAFTA.  Here’s a sampling of the regulatory rollbacks the banks hope for in TAFTA, as stated by the banks themselves:

  • Exempt banks from regulations: The U.S. Securities Industry and Financial Markets Association – a conglomerate of Wall Street firms like AIG, Citigroup, JP Morgan, Bank of America and Goldman Sachs – suggests that via TAFTA, U.S. and EU governments could simply “agree to exempt financial services firms of the other party from certain aspects of its regulatory regime with respect to certain transactions, such as those with sophisticated investors.” That is, so long as foreign banks are dealing with “sophisticated” investors, regulators need not bother with regulating the banks.
  • Weaken the Volcker Rule: The Association of German Banks has made clear it has “quite a number of…concerns regarding the on-going implementation of the Dodd-Frank Act (DFA) by relevant US authorities,” referring to the Wall Street reform enacted in the wake of the financial crisis. The banking conglomerate includes Deutsche Bank, a German megabank that received hundreds of billions of dollars from the U.S. Federal Reserve in exchange for mortgage-backed securities in the aftermath of the crisis. The German banking behemoth particularly takes issue with the Volcker Rule, designed to keep banks from taking risky bets with federally-insured funds for their own profit, calling the centerpiece of Wall Street reform “much too extraterritorially burdensome for non-US banks.”   
  • Outsource risk regulation: The European Services Forum, a banking conglomerate including Germany’s Deutsche Bank, has stated that TAFTA should prevent U.S. regulators from placing tougher regulations on too-big-to-fail foreign banks operating in the United States unless foreign government entities do so first: “we think that it should not be possible for a company operating globally to be designated as a systemically important financial institution (SIFI) in a foreign jurisdiction but not in its domiciliary jurisdiction.”
  • Remove state-level leverage limits: Insurance Europe, a collection of Europe’s largest insurance firms, has stated its hope that TAFTA can be used to  “remove” collateral requirements enacted by U.S. states to keep insurance corporations from taking on risky degrees of leverage: “Insurance Europe would like to see equal treatment for financially secure well regulated reinsures regardless of their place of domicile with statutory collateral requirements removed.”

Investor Privileges: Empowering Banks’ Deregulatory Push

U.S. and EU corporations and officials have called for TAFTA to grant foreign banks the power to skirt domestic courts, drag the U.S. and EU governments before extrajudicial tribunals, and directly challenge domestic financial safeguards as violations of TAFTA-created foreign investor “rights.” The tribunals, comprised of three private attorneys, would be authorized to order unlimited taxpayer compensation for financial regulations perceived as undermining banks’ “expected future profits.” Such extreme “investor-state” rules have already been included in U.S. “free trade” agreements, forcing taxpayers to pay corporations more than $400 million for toxics bans, land-use rules, regulatory permits, water and timber policies and more. Just under U.S. pacts, more than $14 billion remains pending in corporate claims against medicine patent policies, pollution cleanup requirements, climate and energy laws, and other public interest polices. The EU is proposing an even more radical version of these rules for TAFTA, further empowering banks’ efforts to return to the deregulatory era that led to financial crisis. 

Fast Track: Railroading Democracy to Railroad Safeguards?

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

December 13, 2013

This Deal Could Make You Sick: A Backdoor for Food Contamination

Next week, the safety of our food could be up for negotiation.  

In case you missed it, negotiators from the European Union and the Obama administration will converge in Washington, D.C. next week for a third round of talks on the Trans-Atlantic Free Trade Agreement (TAFTA).  What is TAFTA?  A “trade” deal only in name, TAFTA would require the United States and EU to conform domestic financial laws and regulations, climate policies, food and product safety standards, data privacy protections and other non-trade policies to TAFTA rules. 

We profiled recently the top ten threats this deal poses to U.S. consumers.  One area of particular concern is how TAFTA's expansive agenda implicates food safety.  Here's a synopsis. 

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

U.S. and EU TAFTA negotiators, advised by the world’s largest agribusinesses, have used coded language in pushing for TAFTA rules that could roll back food safety standards. A leaked EU position paper reveals that EU negotiators are pushing for TAFTA to impose sweeping restrictions on food safety policies by mandating that such measures “must be applied only to the extent necessary to protect human, animal, or plant life or health.” Such terms would enable foreign governments to second-guess the “necessity” of domestic safety standards. U.S. negotiators have called for parallel TAFTA restrictions. Some members of Congress have even openly called for TAFTA to do away with “spurious” sanitary regulations, asking that TAFTA-created tribunals be empowered to rule on the validity of domestic food safety standards challenged by foreign governments.

Food Corporations’ TAFTA Agenda: Deregulation without Disguise

European and U.S. food corporations, in their formal demands issued to TAFTA negotiators, have been remarkably candid in naming the specific U.S. and EU safety regulations that they would like to see dismantled via TAFTA.  Here is their wishlist for food safety rollbacks, as stated by the corporations themselves:

  • Contaminated food: BusinessEurope, Europe’s largest corporate group, states, “Key non-tariff barriers affecting EU exports to the US include the US Food Safety Modernization Act.” The landmark 2011 law authorizes the U.S. Food and Drug Administration to recall contaminated food, a prerogative that European corporations would apparently like to see removed via TAFTA. 
  • Questionable meat: The EU corporations in BusinessEurope also state consternation with U.S. “import restrictions on uncooked meat products.” The loosening of such restrictions would allow more European meat to enter the United States at a time when many European countries are eliminating regular meat inspections – a fact that likely contributed to the 2013 scandal in which meat exported by the United Kingdom as “beef” was found to be horse meat.
  • Chlorinated chicken: The U.S. meat industry has stated its annoyance that EU consumers and regulators do not wish to eat meat products treated with “hyperchlorination and organic acids,” as spelled out by the North American Meat Association. Europe’s stronger safety standards limit poultry products’ exposure to contaminants during slaughter and processing. U.S. rules allow for more possibility of contamination, and then for chicken to be treated with antimicrobial chemicals such as chlorine to kill E. coli and other microbes afterward. The corporate group laments that “only the application of water and steam are permitted for use on meat carcasses by the EU.” Yum! Restaurants International, the owner of Kentucky Fried Chicken, has seconded this concern, asking that TAFTA be used to change EU food safety standards so that the company can sell Europeans chlorinated chicken.
  • Weaker U.S. Grade A dairy safety standards: The U.S. safety standards for Grade A milk have been listed as a TAFTA target by EU agribusinesses. The European Association of Dairy Trade acknowledges that the standards “were devised as a means of addressing the risk of food borne illnesses...”  But the industry group then complains that complying with the standards “is both highly cumbersome and expensive.”
  • Ractopamine growth-drug-fed pork: The American Meat Institute protests that “the EU continues to maintain its unjustified ban on meat produced with beta-agonist technologies, such as Ractopamine Hydrochloride.” Ractopamine is a drug approved in the United States to increase beef, turkey and pork muscle mass. It has been banned or limited in 160 nations (including EU member countries, Russia, and China) due to potential risks to human and animal health. The National Pork Producers Council has made clear that TAFTA should be the vehicle for erasing the EU ractopamine ban: “U.S. pork producers will not accept any outcome other than the elimination of the EU ban on the use of ractopamine in the production process...”
  • Fruits with higher pesticide residue: The California Table Grape Commission “is also concerned about European pesticide maximum residue levels (MRLs)…many of the MRLs established are at levels significantly lower than corresponding U.S. MRLs.” CropLife America, an agribusiness conglomerate that includes Monsanto, similarly complains that the EU does not allow as much pesticide residue on food as the United States permits – a “trade barrier” to be dismantled via TAFTA. The corporate alliance takes issue with European limits on pesticides that contain “endocrine disrupters” – a type of chemical linked with cancer and birth defects – complaining that European restrictions on such toxins “prevent U.S. agricultural and food products from entering the EU.”

Investor Privileges: Agribusinesses Empowered to Attack Food Safety Laws Directly

U.S. and EU corporations and officials have called for TAFTA to grant foreign firms the power to skirt domestic courts, drag the U.S. and EU governments before extrajudicial tribunals, and directly challenge food safety laws that they view as violations of TAFTA-created foreign investor “rights.” The tribunals, comprised of three private attorneys, would be authorized to order unlimited taxpayer compensation for domestic policies perceived as undermining agribusiness firms’ “expected future profits.” Such extreme “investor-state” rules have already been included in U.S. “free trade” agreements, forcing taxpayers to pay firms more than $400 million for toxics bans, land-use rules, regulatory permits, water and timber policies and more. Just under U.S. pacts, more than $14 billion remains pending in corporate claims against medicine patent policies, pollution cleanup requirements, climate and energy laws, and other public interest polices. The EU is proposing an even more radical version of these rules for TAFTA, offering firms a new tool to roll back food safety rules.

Fast Track: Railroading Democracy to Railroad Safeguards?

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

December 12, 2013

The Top 10 Threats of the Trans-Atlantic “Trade” Deal To U.S. Consumers

Next week negotiators from the European Union and the Obama administration will converge in Washington, D.C. for a third round of talks on the Trans-Atlantic Free Trade Agreement (TAFTA). How might this immense deal impact you and your community?  To answer, we've dug through hundreds of pages of corporations' formal requests for the deal (which reads like a candid deregulatory wishlist) and decoded months of opaque government statements about the pact's controversial content.  Here we present a TAFTA 101 overview, including TAFTA's top 10 threats to U.S. consumers, to be followed by deeper looks at the particular financial, environmental, and consumer safeguards that TAFTA threatens. 

TAFTA 101

A “trade” deal only in name, TAFTA, which corporate proponents have tried to rebrand as the Transatlantic Trade and Investment Partnership (TTIP), would require the United States and EU to conform domestic food and product safety standards, financial regulations, climate policies, data privacy protections and other non-trade policies to TAFTA rules – rules being negotiated in secret.

TAFTA negotiations focus on demands by large corporations on both sides of the Atlantic to remove consumer and environmental safeguards that they dub as “trade irritants.” TAFTA rules are being negotiated behind closed doors. About 600 official U.S. corporate trade advisors are being provided access to documents and decision-makers, while the public and press are locked out.

Some products and services that do not meet U.S. health and safety standards could be allowed into our markets.  Other provisions could require U.S. regulations to conform to new trans-Atlantic standards negotiated to be more convenient to business, instead of standards developed by state and national laws over decades.

These constraints on U.S. domestic policy would be binding. Once TAFTA took effect, even if public opinion came out strongly against the weakening of safeguards or if the federal government changed, TAFTA’s terms could only be altered if all signatory nations agreed. Failure to comply with the new rules could result in trade sanctions against the United States or orders to compensate firms that claimed their newly established rights were violated. TAFTA negotiators have stated a goal of finishing the sweeping deal by the end of 2014.

TAFTA's Top 10 Threats to U.S. Consumers

1.  Attacks by foreign corporations on our local, state, and federal policies: European-based corporations that own more than 24,000 subsidiaries in the United States would be empowered to bypass U.S. courts and directly challenge the U.S. government before foreign tribunals. Comprised of three private attorneys, the extrajudicial tribunals would be authorized to order taxpayer compensation for public interest policies that European corporations claim undermine their TAFTA investor rights. Foreign companies have used such privileges in past “trade” deals to attack renewable energy policies, bans on toxins, medicine patent standards, financial regulations and land-use and other non-trade policies, extracting $3.5 billion so far from taxpayers under U.S. deals.

2.  Rollback of financial reforms: EU negotiators have explicitly called for TAFTA to roll back Wall Street reforms with new “disciplines” that would limit the regulation of banking, securities and insurance. They have explicitly targeted the Volcker Rule (a ban on hedge-fund-style trading by commercial banks), the Federal Reserve’s proposed rules for foreign banks, and state-level regulation of insurance. U.S. negotiators, advised by Wall Street banks, have also proposed TAFTA rules that conflict with proposals to ban toxic derivatives, limit the size of too-big-to-fail banks, enact financial transaction taxes and reinstate the Glass-Steagall Act.

3.  Tainted milk: European agribusiness corporations have listed U.S. safety standards for Grade A milk as an “obstacle” that they hope can be removed via TAFTA. The European Association of Dairy Trade acknowledges that the standards “were devised as a means of addressing the risk of food borne illnesses,” but the industry group hopes the standards can be weakened because the process for complying with them “is both highly cumbersome and expensive.”

4.  Dirty fuel: BusinessEurope, representing European oil corporations such as BP, has asked that TAFTA ban tax credits for alternative, more climate-friendly fuels like algae–based and other emerging fuels that reduce carbon emissions. The corporations openly state, “US fuel tax credits and Cellulosic Biofuel Producer Credit should become impossible in the future.”

5.  Unsafe medicines: European pharmaceutical manufacturers have called for the U.S. Food and Drug Administration to relinquish its current responsibility to independently approve the safety of medicines sold in the United States. They propose that the U.S. government automatically accept a European determination that a drug produced in Europe is safe for U.S. consumers.

6.  Invasion of data privacy: U.S. technology and communications corporations have bluntly asked that TAFTA make it easier for them to gather our personal information – mobile, location, social, PC and offline – and data mine it to create ongoing tracking and targeting profiles of consumers. Firms do not want meaningful privacy safeguards that would put consumers’ information off limits. The U.S. Council for International Business, which includes corporations like Verizon that have handed U.S. citizens’ personal data to the National Security Agency en masse, has stated that TAFTA “should include commitments that data can flow unimpeded across borders except for limited and well-defined public policy exceptions. The agreement should seek to circumscribe exceptions, such as security and privacy, to ensure they are not used as disguised barriers to trade.”

7.  Loss of local job creation through “Buy Local” rules: The EU intends to use the deal to ban popular Buy American and Buy Local policies that ensure that U.S. government projects are used to create U.S. jobs. While past “trade” deals have restricted some Buy American policies, the EU hopes that TAFTA can be used to go further and eliminate Buy Local policies used by state and local governments to reinvest tax dollars to create jobs at home. In a leaked position paper, the EU explicitly names 13 U.S. states and 23 U.S. cities it is targeting for rollback of Buy Local policies.

8.  Unlabeled genetically-modified food: About half of U.S. states now have legislation to label food containing genetically-modified organisms (GMOs). Unable to stop this trend domestically, GMO-producing firms like Monsanto are pushing for TAFTA to quash GMO labels. The National Confectioners Association bluntly states, “US industry also would like to see the US-EU FTA achieve progress in removing mandatory GMO labeling and traceability requirements.” The TAFTA rules advocated by U.S. firms to roll back EU regulation of GMOs could be used to counter the increasing moves by U.S. state legislatures and federal regulators to label genetically-modified food.

9.  Expensive medicines: The Pharmaceutical Research and Manufacturers of America (PhRMA), the powerful lobby group for U.S. pharmaceutical corporations like Pfizer, is pushing to limit the ability of the U.S. and EU governments to negotiate lower health care costs for taxpayer-funded health care programs through TAFTA. The U.S. government uses such measures to lower medicine costs for veterans and others. The Obama administration has proposed to do the same to limit rising Medicare costs.

10.  Dangerous toys: European toy corporations (represented by the Toy Industries of Europe) have recognized that there are differences between EU and U.S. toy safety regulations, including “flammability, chemical and microbiological hazards.” However, their stated goal is for U.S. parents to trust the safety of toys inspected abroad. The corporations hope to use TAFTA to overcome what they “expect” to be consumers’ “strong reluctance to accept the methods and requirements applying in [sic] the other side of the Atlantic.”

November 05, 2013

Want to Weigh in on a Controversial “Trade” Deal? Please Pay $2000.

Surprise!  The second round of negotiations for the massive Trans-Atlantic Free Trade Agreement (TAFTA) won’t be happening in Washington, DC in December as planned.  It will be happening in six days.  In Belgium. 

That was the last-minute announcement in an email sent by the Office of the U.S. Trade Representative (USTR) at 9:40pm last night. 

But don’t worry.  If you are someone who is concerned about what the deal's proposed deregulatory terms could mean for the safety of your food, the cleanliness of your air, the stability of your economy, or the privacy of your data, you can still air such concerns with TAFTA negotiators. 

That is, so long as you can get yourself to Brussels by next week. 

USTR’s email yesterday invited “stakeholders” to a “briefing session” next Friday where “non-governmental organizations, consumer groups, trade unions, professional organizations, business and other civil society organizations will have the opportunity to exchange views with U.S. and EU chief negotiators.”  It just happens to be taking place on the other side of the Atlantic Ocean. 

This may well be the most expensive “stakeholder engagement” opportunity presented by the Obama administration for one of its sweeping “trade” deals.  At current prices, the cheapest last-minute flight to “exchange views” with TAFTA negotiators in Brussels would set you back $1977. That may not be a problem for the approximately 600 corporate trade “advisors” who are already deeply involved in helping USTR craft TAFTA negotiating positions.  For the rest of us, it’s a bit like getting an email invitation to your friend’s destination wedding in Cancun a week before the ceremony (psst...I don’t really want you to come). 

Unfortunately, such barriers to public oversight have become all too common at USTR.  In an announcement USTR sent last month to notify press outlets of upcoming events, entitled “Press Week Ahead,” not a single event was actually open to the press.  The seven posted events ranged from closed-door Trans-Pacific Partnership (TPP) negotiations that threaten to drive up the cost of medicines, to a corporations-only discussion with USTR about a new pact with China that would empower Chinese firms to challenge U.S. domestic policies, to a private USTR meeting with the CEO of BMW.  All seven events were marked “Closed Press.” 

What do our trade negotiators have to hide?  If USTR actually wants to ensure that sweeping deals like TAFTA reflect the interests of U.S. consumers, why give them a week’s notice to fly to Brussels to express those interests?  Or is it possible that the plans being hatched for TAFTA, the TPP, and other pacts actually threaten the public interest, and that hiding this reality requires inaccessible negotiations, secretive texts, and “closed” events? 

It’s time to shine the light of public scrutiny on shady “trade” deals that implicate everything from job availability to GMO labels to Internet freedom.  The texts must be public.  The events must be open.  And the opportunities to engage must not require a $2000 plane ticket. 

October 25, 2013

Report: "A Brave New Transatlantic Partnership"

When negotiations on the proposed Trans-Atlantic Free Trade Agreement (TAFTA) took a hiatus during the government shutdown, corporate groups urged the Obama administration to push forward with the sweeping deal.  U.S. and EU officials now plan to restart closed-door TAFTA talks in Washington in December. 

What will they be talking about?  Given that tariffs between the U.S. and the EU are already low, TAFTA proponents readily acknowledge that the agreement is not really about trade, but rather the rewriting of regulatory policies so as to remove “non-tariff barriers” –- a corporate code name for environmental, health, and consumer safeguards on which we all depend.

What particular safeguards could be dismantled via these corporate-advised "trade" negotiations?  The European organization Seattle to Brussels Network has released a worrisome report that outlines some of the public priorities that corporations on both sides of the Atlantic have asked to be placed on the TAFTA chopping block:

1. Clean air and water:
The report notes that industry groups on both sides of the Atlantic have been calling for TAFTA to "harmonize" U.S. and EU environmental rules -- that is, replacing existing domestic environmental protections with ones negotiated to be more convenient to business. Corporations have been taking particular aim at the EU's climate stability policies, pushing for a downward "harmonization" with U.S. standards via TAFTA. The report also explains how TAFTA could encourage a surge in the dangerous process of fracking in the U.S. while chilling green jobs programs.

2. Food safety:
So-called “non-tariff barriers” also include food labeling and sanitary standards that keep consumers safe. In Europe, bans on genetically-modified food, hormone-treated beef and pork, and chlorine-sterilized chicken could be weakened. In the U.S., basic dairy standards and restrictions on "mad cow" beef could be threatened.

3. Internet freedom:
If a chapter on "intellectual property rights" is included in the deal, TAFTA could serve as a backdoor way for business groups to quietly push through components of the controversial Stop Online Piracy Act (SOPA) and Anti-Counterfeiting Trade Agreement (ACTA), both of which were defeated due to intense public protest. The report notes that the leaked European Commission mandate for TAFTA, which sets a blueprint for the agreement, indeed proposes the inclusion of "intellectual property" provisions, opening the door to SOPA/ACTA-like rules.

4. Chemical safeguards:
According to the report, there are about 30,000 chemicals associated with cancer, infertility, diabetes, and obesity that have to undergo much stricter testing requirements in the EU than in the U.S. "If the EU caves in under industry pressure," states the report, "a likely casualty of [TAFTA] will be REACH – the EU’s iconic safe chemicals law that many consumer, health and environmental groups in the US have tried to replicate." Such an outcome would not only undermine the EU's stronger chemical safety standards, but make it far more difficult to improve the weaker U.S. standards.

5. Wall Street reform:
As regulators draft rules for big banks to prevent the sort of risk-taking that led to the financial crisis, the banks themselves are pushing for TAFTA to restrict such reregulatory efforts.  The report notes that European banks have openly called for TAFTA to be used to roll back key components of U.S. Wall Street reforms.  In response, EU TAFTA negotiators have pushed for financial regulation to be included in TAFTA's deregulatory framework, posing a threat to financial stability.

And that’s only a sampling of the issues at stake under TAFTA. To learn more, check out Seattle to Brussels’ full report, “A Brave New Transatlantic Partnership.”

October 09, 2013

Corporations Ask to Write their Own Regulations via "Trade" Deal

The New York Times has just reported that European government officials have been taking pains to entertain corporations' deregulatory demands for the Trans-Atlantic Free Trade Agreement (TAFTA).  The European Commission appears to have mistakenly released minutes of confidential government meetings held with U.S. and European corporations to see how their priorities could shape the proposed U.S.-EU deal.  This may not come as a shock to those in the U.S. who know that the Obama administration has been regularly soliciting private advice on both TAFTA and the Trans-Pacific Partnership (TPP) from about 600 corporate trade "advisors" who are granted privileged access to negotiators and secretive trade texts. 

But the just-released minutes of the meetings between EU officials and U.S. and European corporate heads (among other documents unearthed by Corporate Europe Observatory and the New York Times) reveal the incredible extent to which corporations are pushing for TAFTA to rewrite health, environmental, financial and other safeguards to be more convenient to industry interests.  Here are a few of the sweeping TAFTA demands explicitly expressed by the corporations of the U.S. Chamber of Commerce and BusinessEurope.

  • Rules that cater to multinational corporations should be considered as an alternative to "domestic-oriented" safeguards: The corporate conglomerates asked the EU and U.S. government officials to establish in TAFTA a new methodology for second-guessing new consumer and environmental safeguards, pausing before enactment of the new protections to ask whether they are sufficiently convenient to trans-Atlantic corporations.  In particular, they asked that regulators consider the possible "benefits" of scrapping proposed "domestic-oriented regulation" in favor of a "transatlantic regulatory alternative."  Even the European Commission noted that this "would seem problematic, as most regulators will be mandated to achieve certain objectives in view of their domestic market and its citizens."  Ditching the core democratic tenet that policies should be made on behalf of the electorate?  Yes, that would be problematic. 
  • Foreign products that do not meet domestic standards should be allowed if foreign regulators mean well: The U.S. Chamber of Commerce has been pushing for TAFTA to include obligations for European products and services that do not meet U.S. standards to be allowed in the U.S. under a process called “equivalence" -- in which EU regulations, though different, would be deemed roughly "equivalent" to U.S. protections (the same would apply for U.S. products in the EU).  Now the unearthed minutes of the private meeting between European officials and corporate representatives reveal that the Chamber would like TAFTA to require such automatic U.S. acceptance of European products and services on the mere basis that both sides' vaguely-worded regulatory objectives sound similar.  In the private meeting minutes, the European Commission notes, "Chamber pushing strongly for 'top'-down, i.e. ‘if general objectives’ of regulation are the same we shall consider the regulations as equivalent without a thorough assessment."  Such a reckless approach to consumer safeguards could threaten everything from the safety of milk to the stability of banks. 

These unabashed corporate demands, and the European government's careful consideration of them, reveal what's at stake in TAFTA.  The safety standards on which we rely daily for our food, the energy policies needed to avert climate catastrophe, and the Wall Street reforms designed to prevent another financial crisis--these are policies that should be determined in open, democratic venues where we have a say.  Not in backroom discussions between government officials and corporate executives.  Not under the guise of a "trade" deal.  

September 27, 2013

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

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

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

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

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

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

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

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

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

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

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

September 24, 2013

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

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

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

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

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

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

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

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

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

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

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

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

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

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

September 20, 2013

Obama’s Corporate Export Council Ignores Dismal Export Data, Backs More-of-the-Same “Trade” Deals

Yesterday, just before a meeting of the President’s Export Council, we asked whether the powerful, Obama-advising group would recognize that U.S. export growth is seriously lagging and that status-quo “free trade” deals have failed to fulfill promises of increased exports.

They didn’t. 

Somehow the room full of corporate representatives and government officials, “the principal national advisory committee on international trade,” which exists to “promote export expansion” and “discuss and resolve trade-related problems,” made it through two hours of prepared speeches without once acknowledging that we’re 18 years behind schedule to meet Obama’s goal to double exports.  

Groupthink is one plausible explanation.  The members of Obama's top "export" panel include:

  • 17 executives of Fortune 500 corporations and 8 other business representatives
  • 17 administration officials, 9 hand-picked members of Congress, and 2 state and local government officials
  • 0 representatives of labor, environmental, health, consumer, family farmer, or any other public interest groups

It turns out that Obama's "principal national advisory committee on international trade" doesn't need to include a broad cross-section of groups and concerns implicated by trade policy.  Perhaps if a single worker, farmer, or advocate had been present, someone would have pointed out the obvious: exports (i.e. the group's raison d'être) are not doing well.  

Export CouncilInstead, the group touted insignificant data points as “gains.”  For example, President Obama declared, “Part of the reason we set up the Export Council was to make sure we meet our goal of doubling exports in a relatively short period of time.  And we now sell more goods overseas than ever before.” 

Um, the second sentence’s mundane “achievement” is irrelevant to the first sentence’s central goal.  We have actually “sold more goods overseas than ever before” in 43 of the last 53 years – rising exports has been a longstanding accompaniment to economic growth, not a novel cause for bragging rights. 

Actually, Obama’s unremarkable claim may not even prove true for 2013. The most recent government data indicates that U.S. goods exports so far this year are actually one percent lower than they were in the same period last year.  At the current rate, we’d expect 2013 to be a historically unique year of falling exports. 

If so, Obama’s export-doubling goal, which already looked impossible after last year’s sluggish two percent growth rate (mentioned just once during the Export Council meeting), would become even more remote.

Choosing to ignore this elephant in the room, the President’s Export Council called for a hearty embrace of status quo trade policy. Corporate CEOs and administration officials praised two more-of-the-same pacts currently under negotiation: the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Free Trade Agreement (TAFTA)

No one brought up how exports have actually fared under similar pacts.  No one mentioned that exports to Korea have actually fallen 10 percent under the Korea “free trade” agreement (FTA), a blueprint for the TPP.  No one mentioned that export growth to countries that are not FTA partners has actually exceeded U.S. export growth to countries that are FTA partners by 38 percent over the past decade.

Instead, the Council affirmed the tired and counterfactual narrative that deals like the TPP and TAFTA, which would rewrite wide swaths of non-trade domestic policies, are necessary for export promotion. 

And they reiterated that getting the increasingly controversial deals past a skeptical Congress and a critical U.S. public would require Fast Track – the undemocratic tool used to ram through Congress the Korea FTA, NAFTA, and other past controversial deals whose results the Council resolutely ignored. 

In a decision that took less than thirty seconds, and entailed zero deliberation, the Council approved a resolution supporting Obama’s push for Fast Track.  The Chair, representing Boeing, did not even bother to call a voice vote, opting instead to “assume no objection” and then declare approval of the resolution by stating, “I so move, all in favor, okay.”

So is the President’s Export Council really blind to the current export problems that are central to its mandate?  Are they really unaware of the shoddy export record of “free trade” deals to which they are unblinkingly committed? 

Or do the Council members, representing some of the country’s most aggressive corporate interests, have something else to gain by advocating for the TPP and TAFTA?  For example, Council member J.P. Morgan, Wall Street’s largest firm, might be less concerned with the deals’ implications for exports and more interested in the constraints that the pacts would impose on the reregulation of Wall Street

Maybe Pfizer and Merck, both incoming Council members, decided to join the powerful body to push for the TPP proposal to expand their monopoly patent protections, increasing their profit margins and our medicine prices.  And Walt Disney may be particularly keen, as a Council Member, in pushing for the TPP to include some of the draconian copyright provisions that the corporation failed to get enacted in the Stop Online Piracy Act (SOPA), defeated in Congress as a threat to Internet freedom.  Archer Daniels Midland, meanwhile, would probably like to use its Council membership to push for TAFTA to weaken EU limits on genetically-modified food, while Council member Verizon has already expressed its hope that the pact can be used to roll back Europe’s data privacy safeguards

It’s possible that the President’s Export Council is delusional about the shoddy export record of the status-quo “trade” model that the TPP and TAFTA would expand.  It’s more likely that they are willfully ignorant.  The corporations’ unqualified support for the pacts likely stems not from data-defying hopes of export promotion, but from realistic expectations that the sweeping deals would rewrite health, environmental, financial, and other domestic safeguards that the corporations find inconvenient – and that most of the rest of us find essential.

Will President Obama grant the wishes of his corporate Council members?  In his closing remarks for the meeting, Obama joked, “I am expecting a gold watch from Boeing at the end of my presidency, because I know I’m one of the top salesmen for Boeing.” As Obama continues attempting to sell the TPP and TAFTA to the U.S. public and fast track the controversial pacts through Congress, the likes of Boeing, J.P. Morgan, and Pfizer must be lining up the gold watches.  

July 19, 2013

TAFTA: Corporations Express Fear of Democracy

The Trans-Atlantic Free Trade Agreement (TAFTA) negotiations have only just begun, but already hundreds of corporations are weighing in to let negotiators know what they hope to get out of the agreement.  In many cases, multinational corporations submit their views to both sides, and one shudders to imagine teams of European and U.S. negotiators lining up with identical talking points representing the views of “their” corporations, and speedily agreeing on “uncontroversial” sections that favor the interests of corporations over consumers.

Many of the large corporations use their comments to signal their support of “science-based regulation” over “political” considerations (read: support for a weakening of safeguards, such as labels for genetically-modified food, over popular backing for those safeguards).  Here is a selection of some official corporate statements to that effect on TAFTA and food and product safety, submitted either to the U.S. Trade Representative or the Joint EU-U.S. Solicitation on Regulatory Issues:

 Food Safety

  • “Science-based risk assessment, as the foundation for regulatory decisions, must not be overruled by an incorrect (and politically driven) application of the precautionary principle, as currently applied by the EU (Croplife America, a lobbying group of U.S. pesticide corporations that includes genetically-modified-organism (GMO) giant Monsanto)
  • Finally, the EU’s political approach in regulating crops enhanced with traits achieved through modern biotechnology procedures is a concern to U.S. wheat producers. The EU biotechnology approval process is slow and often influenced more by politics than science, creating uncertainty and deterring new investment in wheat research… Science and market preferences, not politics, should be the determinants. (U.S. Wheat Associates)
  • The current 'asynchronous approval' situation is caused by many factors, including risk assessment guidelines that are not aligned and increasing politically-motivated delays in product approvals. (National Grain & Feed Association and North American Export Grain Association, lobbying groups comprised of the largest U.S. agribusinesses, such as Cargill and Archer Daniels Midland)
  • International trade rules fully support trade in products of biotechnology for planting, processing and marketing, subject to science-based regulation… Politically motivated bans or moratoria by WTO member states are not consistent with members’ WTO obligations. (National Corn Growers Association)
  • The implementation of production standards based on politics or popular thought instead of science will do nothing more than eliminate family operations and drive up costs to consumers. (National Cattlemen's Beef Associationa factory-farm-supporting lobbying group for the beef industry)
  • What is deeply concerning about the EU’s overall approach to SPS [sanitary and phytosanitary] issues, however, is that its political body is frequently given the ability to override the EU’s own scientific authority’s findings to instead establish restrictions on products based typically on animal welfare or consumer preferences. (National Milk Producers Federation & U.S. Dairy Export Council)

 Product Safety

  • Significant barriers to further alignment, namely politics and differences in regulatory approach, remain on both sides of the Atlantic. Our experience has also shown that politics and differences in regulatory philosophy are fundamentally the root causes for differences in toy safety standards… Frequently, standards that are stricter than their international counterparts are promulgated due to political influence or the (often unstated) desire to erect technical barriers to trade, and not predicated by science or risk factors. (Toy Industry Association and Toy Industries of Europe)
  • We would like to highlight the fact that these regulatory differences are often politically motivated… We regret that the differences in regulations in the EU and US are often caused by the result of politics rather than a different approach to ensuring safety. (Toy Industries of Europe)
  • Such discussions need to take place between technical, not political or administrative, entities and need to make business sense for the organizations involved. (ASME, a lobbying group for engineers -- the first U.S. "non-profit" entity convicted for violating antitrust laws)

But what do these corporations mean when they use the word “political?"  One possibility is anything they happen to disagree with. 

But let’s give them slightly more credit than that –- what happens if we substitute the words democracy/democratic for politics/political?  After all, the "political" bodies the corporations fear are the democratically elected representatives of the people

Now we see:

  • Croplife (i.e. Monsanto) complaining about the European Commission’s democratically driven application of the precautionary principle, which restricts GMOs.  
  • U.S. agribusinesses decrying democratically-motivated delays in approving GMOs and other products that raise food safety concerns.  
  • The beef industry worrying about production standards based on democracy or "popular thought."
  • Big Dairy concerned that the EU’s democratic body prioritizes "animal welfare [and]consumer preferences."  
  • Toy corporations fearing that democratically motivated regulations will lead to stricter "toy safety standards."  
  • ASME wanting to keep democratic entities out of the room so that regulation “makes business sense for the organizations involved."

The idea that we can choose science over democracy when making our regulations is, of course, nonsense.  Science doesn’t tell us how we should decide between safer toys and cheaper toys (or larger profits for toy companies).  Science doesn’t tell us how cautious we should be about eating food that has been genetically modified to increase farm industry profits.  Science doesn’t tell us how to value cheaper meat and milk versus safeguards that limit the use of antibiotics or acidic carcass cleaning and that allow animals to live in a cage large enough to turn around in. 

Science can inform the unavoidable trade-offs in our policy choices.  But in the end we, the people, not they, the unelected trade negotiators and their corporate advisors, must decide how to strike the balance.

As the TAFTA negotiations get underway, this attempt by industry insiders to concoct an argument that they should be involved in writing regulation, but our democratically elected bodies should not, is yet another reminder of the danger of allowing an agreement to be negotiated behind closed doors, with hundreds of corporate “advisors,” and without transparency to the public or even our democratically elected representatives.

July 16, 2013

Is Commissioner Barnier the "Fat Cat's Meow"?

Fat catOn the heels of the first round of negotiations of the Transatlantic Free Trade Agreement (TAFTA) held in Washington DC last week, the European Union's Commissioner for Internal Market and Services Michel Barnier spoke at  at the Brookings Institution on his way to meet with U.S. Treasury Secretary Jack Lew.  Much to the dismay of consumer advocates who have pushed for financial re-regulation since the crisis, Commissioner Barnier has been an outspoken critic of aspects of the Dodd-Frank financial reform, and has made clear his intentions to use TAFTA negotiations to go after them! 

Big U.S., Canadian, and European banks, which have cited U.S. trade obligations in their attempts to water down pieces of Dodd-Frank, are likely quite pleased to have Commissioner Barnier on their side.  Perhaps that's why a literal fat cat with a sign that read "Banksters for Barnier Heart TAFTA's Financial Deregulation" came to greet the Commissioner outside the event at Brookings yesterday.  

The Commissioner's talk, hosted by the normally very straight-laced and dry Brookings Institution, seemed to spark activist creativity.  Not only was there a feral feline outside, but apparently the same pranksters, who had distributed cards at the TAFTA negotiations ostensibly from the National Security Agency welcoming European negotiations and thanking them in advance for sharing their negotiating positions, were at it again.  This time I saw taped up in the Brookings restroom stall a similar card that said "The NSA commends Commission Barnier on his remarks in advance (because we read all of his emails)".  That poke probably didn't sit too well with the European officials who are dealing with officials from member states who are hopping mad about the claims of NSA spying on European diplomatic missions.

NSA BarnierMr. Barnier nervously mentioned that he had "the pleasure to meet a fat cat with a sign that said Barnier is a deregulator," before giving his prepared remarks about "Restoring Momentum in Transatlantic Cooperation on Financial Reform".

During the question and answer period, I took the opportunity to ask Commissioner Barnier the following question:

"In the wake of the financial crisis, consumer protection groups have worked hard to re-regulate the financial service industry in order to avoid future devastating crises.  In the U.S., Dodd-Frank has been a key piece of this.  And as I’m sure you are aware, Wall Street firms and others have lobbied hard to water down aspects of the rulemaking on Dodd-Frank including on its cornerstone Volcker rule. Other important efforts include the proposed new Fed regulations for foreign banks' legal forms and requirements. You have stated repeatedly your concerns about these and other aspects of U.S. financial regulation and impacts on European banks, and mentioned your intent to address these concerns in the TAFTA/TTIP negotiations.  

Senators Elizabeth Warren and Sherrod Brown have publically stated that they find it inappropriate for  so-called trade negotiations to be used as a back door to undermine financial regulation.  The TransAtlantic Consumer Dialogue has prioritized its focus on TAFTA in part due to your comments.
Later you have said that you do not intend to undermine regulation. To an outside observer, including to the banks that support your call to address these issues in TAFTA, it appears that the intent is to use TAFTA to push the same agenda of the largest banks responsible for the financial crises to thwart financial re-regulation efforts in the U.S.? Can you clarify?"

Commissioner Barnier responded, "I can't imagine how anyone would use the TTIP  [which we call TAFTA] to lower the protection for consumers, small investors and taxpayers. At least I would not accept that."

We certainly hope this is the case, though his explicit targeting of specific aspects of U.S. financial re-regulation eerily echoes the desires of the biggest banks.  Just minutes prior to my question, Commissioner Barnier's answer to a question from a representative of a large Japanese bank about his opinion on the new Fed rule on foreign banking institutions was "On that point, I seek exactly what you seek yourself. I think this proposal of legislation must evolve." 

July 11, 2013

TAFTA’s Trade Benefit: A Candy Bar

This week’s launch of negotiations for a massive U.S. “trade” deal with Europe – the Trans-Atlantic Free Trade Agreement (TAFTA) – has spurred several news articles that cite studies projecting large-sounding economic benefits of the deal. 

How realistic are these projected benefits?  How big are they?  And how do they stack up against the potential cost of eroded environmental, financial, health, and consumer protections?  (A smorgasbord of public interest groups highlighted such threats in a letter to Obama and EU officials on Monday and in briefings before TAFTA negotiators yesterday.) 

Based on one study touted by prominent publications this week, the trade-related benefits we should expect from TAFTA amount toan extra three cents per person per daystarting in 2029. 

TAFTA TwixSo if you’re willing to subscribe to a deal that implicates the stability of our climate and the safety of our food, and you’re willing to wait until today’s newborns reach driving age to see any benefits, you would be able to save enough TAFTA trade benefits over the course of a month to almost buy a candy bar.

The study was cited in a Washington Post Wonkblog piece this week, which praised the potential economic impact of TAFTA-produced tariff reductions between the EU and the United States:

Tariffs on stuff traded between the United States and Europe are currently pretty low, in the 5 to 7 percent range. Getting rid of them entirely means that buyers pay less for goods, and also that firms get more productive to stay competitive — a “dynamic” effect that could boost trans-Atlantic trade by around $180 billion a year.

But this deal is not principally about traditional trade matters like tariffs.  Given that (as stated) tariffs between the U.S. and the EU are already quite low, many corporate proponents of the deal see little to gain from tariff reduction and much more to gain from TAFTA’s stated goal of “elimination, reduction, or prevention of unnecessary ‘behind the border’” policies.  Click here for some of the specific financial stability, climate security, and food safety policies that industries have requested to be placed on TAFTA’s chopping block.  And click here for our retort to a different, oft-cited study that projects economic gains from the gutting of such public interest policies. 

Though the Wonkblog later acknowledges that TAFTA is not primarily about tariffs, it is content to tout a study projecting a large-sounding benefit from tariff reductions. Strangely, however, the touted figure – a $180 billion “boost” to trans-Atlantic trade – does not actually appear in the cited study

It’s not clear how the Wonkblog extracted the $180 billion trade increase figure from a study that projects a $51-122 billion trade increase.  Perhaps the intent was to cite the study’s theoretical projection of a $182 billion increase to U.S. GDP – a result of the most starry-eyed scenario the study could envision.  That number assumes that tariff reductions will cause strong “dynamic” economic growth, a contentious proposition that academics have repeatedly assailed with empirical evidence showing no such trade-growth causation (see here and here).  After dropping this dubious assumption, the supposed $182 billion GDP growth for the U.S. shrivels to just $20.5 billion, according to the study (and to just $1.6 billion for the EU). 

The supposed economic benefits shrink even further when examining the study’s projection of what the deal would mean in terms of actual income (a more relevant indicator than the obtuse GDP benchmark). The pro-TAFTA study projects that total annual U.S. national income would be just $4.6 billion higher under the deal (with EU total income just $3.2 billion higher).  Even this number is unreasonably high, given that it assumes that 100% of existing tariffs between the EU and the U.S. would be fully eliminated under the deal.  While both sides have stated this as an aspirational goal, the EU negotiating mandate already states that “both Parties will consider options for the treatment of the most sensitive products, including tariff rate quotas.”  This ex-ante position suggests a lesser degree of tariff reduction than that assumed by the $4.6 billion figure.  But even proceeding with this inflated figure, we find a rather deflated projection of “benefits.” 

The study assumes that this supposed benefit would occur five years after implementation of the deal.  President Obama has stated his intent to get the deal signed by the end of 2017.  The deal would be quite controversial if negotiators grant industry groups’ wishes for a substantive weakening of consumer and environmental safeguards.  Under the unlikely scenario that such a deal could get past the U.S. Congress, it would probably take several years to do so (the controversial pacts with Korea, Panama, and Colombia languished under protest for about 5 years after getting signed, even under Fast Track), suggesting that ratification wouldn’t happen until 2023, meaning the deal likely would not take effect until 2024.  According to the study, the supposed economic benefits of the deal could be fully felt five years later, in 2029. 

What would the projected $4.6 billion be worth in 2029?  After adjusting for inflation and population growth, that amounts to about an extra three cents per person per day.  Again, after a wait of 16 years, you’d get a candy-bar-sized benefit from each month of TAFTA-provided tariff reductions. 

A dose of reality and simple math confirms that proponents of TAFTA cannot seriously sell the deal with the standard promise that tariff reductions will bring increased welfare.  Once again, this deal in not primarily about “trade,” as traditionally defined.  Industry demands and leaked documents reveal that this deal has more to do with whether we maintain or roll back Wall Street reforms, restrictions on genetically-modified food, data privacy policies, carbon emissions controls, and other key protections.  An honest debate about TAFTA is a debate about whether we like these safeguards, not whether we like trade.  

July 01, 2013

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

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

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

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

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

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

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

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

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

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

June 17, 2013

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

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

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

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

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

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

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

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

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

June 14, 2013

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

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

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

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

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

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

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

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

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

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

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

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

June 13, 2013

Verizon Sees “Trade” Deal as the Next “Share Everything” Plan

We’ve often reported on the surprising array of “non-trade” issues tucked away in so-called “trade” deals.  Today’s “trade” agreements implicate daily facets of life from medicine prices to Internet freedom to food safety standards.  This week Verizon added another sensitive area to that “trade”-implicated list: personal privacy. 

Corporate events in Washington have been abuzz with talk of two new “trade” agreements: the Trans-Atlantic Free Trade Agreement (TAFTA) between the U.S. and EU, and the Trade in Services Agreement (TISA) involving the U.S., EU and 20 other countries.  Both deals aim to use World Trade Organization rules hatched in the deregulation-happy 1990s as the blueprint for restricting the regulation of service sectors such as telecommunications.

Why should we care about “trade” rules impacting telecommunications policies?  In a word: privacy.  Last week’s landmark leak from Edward Snowden revealed that the U.S. National Security Agency is indiscriminately spying on Verizon customers’ telephone records. This week, a Verizon representative speaking on a pro-TISA panel expressed the company’s hope that the “trade” deal can be used to keep privacy policies in check.  (It was perhaps not the most couth timing for Verizon-produced criticism of privacy protections.) 

Verizon Share everythingThe Verizon rep was probably most disgruntled about privacy policies in the EU, a negotiating member of TISA and TAFTA.  The EU’s data privacy protections are significantly more rigorous than those in the U.S. in ensuring that private data can be kept private.  And EU law requires U.S. corporations to meet seven privacy criteria before transferring Europeans’ phone, health, and financial records to the United States, in part due to (now confirmed) fears that the U.S. government could access the private data under the broad provisions of the Patriot Act.  But it appears that Verizon would now like to place these EU cross-border data privacy protections in TISA’s crosshairs.  During the TISA event, the Verizon rep stated that the deal should be used to “make sure that privacy rules do not undermine these seamless data flows” between other TISA countries and the U.S. 

As much of the country criticizes the NSA for secretly collecting private phone records from everyone with a Verizon phone, Verizon itself is taking a different tack: naming “privacy rules” as excessive and “seamless data flows” as insufficient.  They seem to have the diagnosis backwards. 

But through TISA and TAFTA, Verizon clearly hopes to advance that diagnosis, using the deals as a second "Share Everything" plan: an opportunity to impose a ceiling on data privacy protections for the company’s convenience. 

The NSA-Verizon scandal will not help their cause.  U.S. trade officials acknowledged this week that the Verizon data handover, along with NSA’s PRISM spying program, is fueling criticism in Europe of the proposed “trade” deals.  It turns out that the Europeans aren’t too anxious to “seamlessly” transfer their personal information to servers falling under blanket government surveillance.  Having already unwittingly handed over our own information, that's a position those of us in the U.S. should understand. 

June 07, 2013

Obama's Top Trade Official Nominee: The Good, The Bad, and The Ugly

Yesterday was the Senate Finance Committee's confirmation hearing for Michael Froman, Obama's pick to be the next U.S. Trade Representative (USTR).  

If confirmed, Froman would replace Ron Kirk, who left his post as the top U.S. trade official in March to take a job at a corporate law firm that specializes in defending multinational corporations against claims of vast environmental damage, including helping Chevron evade payment of $18 billion in damages for decades of pollution in Ecuador's Amazon.  

We've been a tad skeptical of Obama's pick of Froman, given his Wall Street roots and his role in crafting the much-maligned North American Free Trade Agreement (NAFTA) and the deficit-plagued Korea FTA.  

Here's what went down at yesterday's hearing, divided by the time-honored categories of good, bad, and ugly: 

The Good (maybe)

  • Sen. Sherrod Brown (D-Ohio) raised the fact that "Wall Street and industry-friendly European regulators are now seeking to use any means they can to roll back some of the reforms" enacted since the 2008 financial crisis to rein in banks' excessive risk-taking.  Specifically, he mentioned that big banks on both sides of the Atlantic are trying to use the newly-hatched Trans-Atlantic Free Trade Agreement (TAFTA) as a backdoor means of attacking controls on risky derivatives, too-big-to-fail regulations and other Wall Street reforms included in the Dodd-Frank reregulatory law.  Froman responded by promising, "There is nothing that we are going to do through a trade agreement to weaken our financial regulation, to roll back Dodd-Frank, or to roll back the efforts that the administration and Congress have worked on for the last four years to reform our financial regulatory system here."  Really?  If honored, Froman's promise would represent an about-face in U.S. trade policy.  USTR is currently pushing provisions in the Trans-Pacific Partnership (TPP) that would prohibit bans on risky derivatives, counteract too-big-to-fail regulations, and bar capital controls -- the very deregulatory moves that Froman says are now off the table.  Will Froman halt USTR's legacy of helping banks use "trade" deals to water down financial regulation?  Given Froman's Citigroup stomping grounds, we're skeptical.  But so long as Froman's in the business of promising change, we're in the business of holding him to that promise.   

The Bad

  • Sen. Brown also highlighted the incredible proposal to include the extreme investor privileges of past NAFTA-style deals in the U.S.-EU deal (TAFTA). The proposal -- to empower foreign corporations to circumvent domestic courts and directly challenge health and environmental policies before extrajudicial tribunals authorized to order taxpayer compensation -- sparked a flood of critical comments from the public to USTR last month.  Brown asked, "Do we need an extrajudicial and private enforcement system when U.S. and European property rights are...advanced and protected already?"  Froman dodged the question, saying the matter was a "topic worthy of discussion."  More aptly, it's a topic worthy of an answer.  The appropriate response to Brown's yes-or-no question would have been, "No. Empowering foreign corporations to completely circumvent our courts is unnecessary for investor protection, insults basic democratic tenets, and threatens consumers' health and taxpayers' wallets."  
  • Sen. Ron Wyden (D-Ore.) raised the extraordinary secrecy shrouding the Obama administration's trade negotiations to date.  Wyden has blasted USTR's incredible decision to keep the negotiating text of the sweeping TPP pact, affecting everything from food safety to Internet freedom, hidden from the U.S. public and even from members of Congress.  Not even the Bush administration attempted that degree of secrecy.  Wyden asked, "If confirmed, will you make sure that the public...gets a clear and updated description of what trade negotiators are seeking to obtain in the negotiations so that we can make this process more transparent in the future?" Wyden further asked that negotiating texts be placed online.  Froman responded by saying he agrees with the principle of transparency.  But instead of committing to a meaningful fulfillment of that principle by releasing the TPP text online (as done under Bush), he reiterated USTR's general desire to seek input from "stakeholders."  It is of course difficult for stakeholders to provide meaningful input if they cannot see the thing in which they have a stake.   
The Ugly
  • Gothmog1Froman (and Obama) plan to pursue Fast Track: "If confirmed, I will engage with you to renew Trade Promotion Authority. TPA is a critical tool."  Fast Track, cynically rebranded "Trade Promotion Authority," is indeed a tool.  A battering ram sort of tool.  A tool that, before allowed to expire, was used to shove unpopular "trade" deals like NAFTA through Congress by empowering the executive branch to negotiate and sign the sweeping pacts before sending them to Congress for a no-amendments, limited-debate, expedited, post-facto vote.  Click here for a full analysis of Fast Track's democracy-curtailing, NAFTA-enabling track record.  If past is precedent, any attempt from Froman to refurbish this antiquated legislative ramrod would prove vastly unpopular among the U.S. public and Congress.  We'll see if Froman, despite the political liability, makes good on his threat to, as one of his first acts, pick a Fast Track fight.  

May 16, 2013

Flood of 10,000 Critical Public Comments Spotlights TAFTA Controversy

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

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

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

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

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

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

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

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

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

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

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

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

 Growing Public Outcry over TAFTA

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

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

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

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

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

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

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

Coalition for Sensible Safeguards:

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

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

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

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

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

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

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

United Steelworkers:

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

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

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

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

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

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

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

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

April 12, 2013

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

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

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

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

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

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

March 01, 2013

The Obama Administration Wants to Sell You a Used Trade Policy

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

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

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

Fast Track

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

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

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

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

Trans-Pacific Partnership

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

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

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

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

Trans-Atlantic FTA

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

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

Exports and Jobs

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

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

Buy American and Green Procurement Policies

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

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

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

February 13, 2013

SOTU, TPP, TAFTA -- WTF?

Op-ed by Global Trade Watch Director Lori Wallach, published in The Huffington Post:

Did you notice the two rabid skunks President Obama unleashed at the State of the Union picnic?

Creating American jobs! Rebuilding American manufacturing! Boosting American exports! Promoting innovation! Ensuring strong health and environmental protections! Completing an 11-nation NAFTA-style "free trade" agreement (FTA) called the Trans-Pacific Partnership (TPP) - aka NAFTA with Vietnam? Launch of "free trade" negotiations with Europe long-demanded by multinational corporations to eliminate vital consumer protections - the Trans-Atlantic Free Trade Agreement (TAFTA)?

Two of these things are not like the others. Indeed, TPP and TAFTA would gut many of the most worthy goals included in Obama's SOTU address if the American public and Congress let them come to fruition.

Says who? Well, the official U.S. government trade and employment data, to start with. Since the implementation of our existing FTAs, more than 60,000 U.S. manufacturing facilities have been shuttered and we have lost five million manufacturing jobs - fully one quarter of America's manufacturing jobs prior to the agreements' implementation. Like TPP, these past pacts include investment rules that actually incentivize the offshoring of American jobs.

And, U.S. export growth to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 38 percent over the last decade. The aggregate U.S. trade deficit with FTA partners has increased by more than $144 billion (inflation-adjusted) since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $55 billion since 2006 (the median entry date of existing FTAs). Even using the Obama administration's net exports-to-jobs ratio and excluding China trade, the FTA trade deficit surge alone implies the loss of nearly one million American jobs. So, let's do more of the same NAFTA-style pacts, but this time with Vietnam, the low-wage offshoring alternative to China.

Maybe the TPP and TAFTA touting is just pure cynicism. For instance, note that the president did not reiterate his 2010 State of the Union goal of doubling U.S. exports in five years by passing more "free trade" agreements. With two years left, the United States should be 60 percent of the way toward achieving this goal. Instead, the U.S. International Trade Commission annual 2012 trade data released this weekend show that under the sluggish 2012 export growth rate of two percent, we will not achieve the president's goal until 2032.

And, the FTAs that Obama touted in last year's State of the Union address have not created the promised industrial jobs. Rather, U.S. government trade flow data tracking the initial outcomes of FTAs with Korea, Colombia and Panama, which took effect in 2012, show that combined U.S. exports to the three countries during the months of FTA implementation fell four percent relative to the same months of 2011. U.S. goods exports to Korea plummeted by 10 percent and the U.S. trade deficit with Korea grew 26 percent. That equates to thousands of lost U.S. jobs just in the first year of that latest batch of more-of-the-same NAFTA-style deals.

Indeed, the annual U.S. trade deficit in goods excluding oil rose six percent in 2012 to $628 billion, the largest non-oil U.S. trade deficit in the last five years. The U.S. trade deficit with China (even with oil included) broke all past records, topping $321 billion. That Obama more-of-the-same trade agenda is working so well, why not more of the same...

But there's more!

While TPP negotiations have been conducted in extreme secrecy for three years, some texts have leaked, including the intellectual property chapter. It contains extreme SOPA-style copyright enforcement terms that would undermine Internet freedom and innovation. Says who? The Electronic Frontier Foundation and some of Congress' most reliable pro-"free-trade" voters from House Oversight Committee Chair Darrell Issa (R-Cal.) to Senate Trade Subcommittee Chair Ron Wyden (D-Ore.) to Rep. Zoe Lofgren (D-Cal.).

And, that Trans-Atlantic FTA? That's the pet project of the Trans-Atlantic Business Dialogue a club of financial, agribusiness, pharmaceutical, chemical and other U.S. and European multinationals. TAFTA's focus would not be trade per se - border taxes (tariffs) are already low. Rather, these talks are aimed at eliminating a list of what multinational corporations call "trade irritants" but the rest of us know as strong food safety, environmental and health safeguards.

The target list? The strongest consumer and environmental policies on either side of the Atlantic. U.S. firms want Europe to gut their superior chemical regulation regime, their tougher food safety rules and labeling of genetically modified foods and their tougher climate policies. European firms are targeting aspects of the U.S. financial reregulation regime, our stronger drug and medical device safety and testing standards and more.

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