LIVE FROM LIMA: Our Health, Environment, and Rights are Not Negotiable!

Civil society from around the globe are in Lima, Peru for the 17^th round of Trans-Pacific Partnership (TPP) negotiations to tell negotiators that a trade agreement that prioritizes the rights of corporations above the well-being of citizens is not acceptable. For the latest news, click here at 5pm today (May 17) to participate in a webinar hosted by activists in Lima.

Several Peruvian organizations have joined together to launch the No Negociable! (Not Negotiable!) campaign to highlight the grave threats that the TPP poses to Internet freedom, the environment, workers' rights, and public health.

Events kicked off on Wednesday when Peruvian activists took part in a press conference  to express their concerns about the TPP:

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+Julia Cesar Cruz (Red Peruana de Pacientes y Usarios), representing Peruvians living with HIV, tuberculosis, and cancer, said that patients of these diseases and others are terrified about how the TPP proposals could affect the lives of those living with chronic illness. She called on President Humala to follow through on his campaign promise to guarantee access to medicines for Peru’s poorest.

+Jose de Echave (CooperAcción) expressed concerns about how TPP’s investment chapter would allow crucial policies to protect indigenous communities and the environment to be challenged.

+Juan Jose Gorritti (CGTP) rejected a trade agreement model that does not respect workers' rights and encourages a race to the bottom.

+Crisólogo Cáceres (ASPEC) expressed concerns about how the TPP would impact consumer rights and privilege corporations over consumers.

+Alejandra Alayza (RedGE) spoke about a Peruvian petition that will be sent to President Humala. (Spanish speakers can find a video of Alayza speaking at the press conference here).

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Several other civil society events have been planned during the round, including an all-day public forum, a protest, and the delivery of signatures to President Humala.  

Stay tuned to Eyes on Trade, as well as our Twitter and Facebook pages, for periodic updates from Lima.

Today: You can also learn more about what is happening on the ground by connecting to a webinar hosted by activists in Lima. To take part in the interactive webinar, join this link TODAY, Friday, May 17th, at 5 PM EST.

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

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

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

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

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

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

Obama Administration Takes Aim at TPP Countries' Public Interest Policies in New Report

Report Indicts Health, Financial, Religious and Other Sensitive Policies as “Trade Barriers” to be Eliminated, Spotlighting Contentiousness of TPP Negotiations

The Obama administration released this week a report that takes aim at a litany of sensitive domestic policies in countries currently negotiating the Trans-Pacific Partnership (TPP), identifying the policies as “trade barriers” that the United States seeks to eliminate. The target list of  TPP nations’ domestic policies, published in the 2013 National Trade Estimate Report by the Office of the U.S. Trade Representative (USTR), offers unusual insight into why negotiations over the sweeping, 11-nation deal are contentious and have repeatedly missed deadlines for completion, said Public Citizen today. 

The 406-page USTR report indicts a wide array of public health policies, financial regulations, politically sensitive manufacturing and agricultural policies and even religious standards as “trade barriers” that should be dismantled. USTR levies such criticism against policies in all current and prospective TPP negotiating parties, including New Zealand’s popular health programs to control medicine costs, an Australian law to prevent the offshoring of consumers’ private health data, Vietnam’s post-crisis regulations requiring banks to hold adequate capital, and Canada’s standards requiring cheese to be made from milk.  

For Malaysia, a predominantly Muslim country, the USTR report admonishes the government for “requiring that slaughter plants maintain dedicated halal facilities and ensure segregated transportation for halal and non-halal products.”  Instead, the report suggests that the government should conform its notions of Islamic meat-processing requirements to those established by Codex Alimentarius, an international food standards body at which multinational food corporations play a central role. USTR also takes issue with restrictions on importation of pork and alcohol in this TPP negotiating country where three out of every five consumers are Muslims.

“Even before the Obama administration’s not-so-diplomatic target list of other countries’ domestic policies, the Trans-Pacific Partnership was on rocky ground, with negotiators from many countries rejecting U.S. demands to expand patent monopolies for foreign pharmaceutical corporations and to subject their financial, health and environmental policies to foreign investor challenges before international tribunals empowered to order government compensation,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “By openly listing the domestic policies in other TPP countries that it wants dismantled, the Obama administration can only intensify growing public concern about the TPP in these countries.”

USTR reserves some of its most detailed policy critiques in the National Trade Estimate Report for Japan, which recently announced its intent to join the TPP negotiations. The report devotes 16 pages to castigating food labeling policies for providing too much information to consumers, outlining how exactly the country should restructure its public insurance system, urging the government to grant tax benefits to foreign universities, and bemoaning Japan’s preference that its military equipment be made domestically. (The United States has similar rules on military procurement.)

The report also takes aim at Japan’s agricultural policies, recommending, for example, the weakening of protections for domestic rice farmers because “Japanese consumers would buy U.S. high quality rice if it were more readily available.” The political party of Japanese Prime Minister Shinzo Abe, backed by powerful farmer groups, has approved a policy position that would require the country to exclude rice, wheat and barley, beef and pork, sugar and dairy products from tariff eliminations in the TPP. In contrast, the USTR report explicitly names all but one of these sensitive sectors (sugar) as high-priority targets for liberalization. 

For several TPP countries, USTR’s National Trade Estimate Report encourages the adoption of copyright enforcement measures akin to those proposed under the Stop Online Piracy Act (SOPA) that was defeated in the U.S. Congress. For example, the report notes that the Obama administration “has also urged Chile…to amend its Internet service provider liability regime to permit effective action against any act of infringement of copyright and related rights.”

When addressing some TPP countries, the USTR report accuses national governments of broad corruption or even incompetence. For example, the report states that two of Peru’s three federal branches of government lack the “impartiality” or “expertise” required to fulfill their responsibilities.

USTR also chooses to mount public criticisms against TPP countries for “trade barriers” that are so specific in definition and trivial in consequence as to seem motivated by comically narrow U.S. corporate interests. For example, the report lambasts Singapore’s import restriction for “non-medicinal chewing gum,” Canada’s high tariff on “breaded cheese sticks,” and Peru’s refusal to import “cars over five years old.”  

Among the report’s hundreds of pages, the following commentaries on TPP countries are some of the most revealing:

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

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

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

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

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

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

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

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

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

New Report Spotlights Trade Rules' Conflict with Sound Financial Regulation

The 2008 global financial crisis reaffirmed the need for robust regulation to address the increasingly reckless banking and financial sector. One of the most important regulatory tools in this post-crisis era of reform is the use of capital controls to regulate cross-border finance, a policy that even institutions long-opposed to capital controls, such as the International Monetary Fund, have now formally recognized as beneficial. However, there is growing concern that the rules of trade and investment treaties may not provide enough policy space for countries to take advantage of these necessary regulatory measures.

In response to this concern, a task force convened in June of 2012 in Buenos Aires, Argentina to review the rules of the WTO and various Free Trade Agreements (FTAs) and Bilateral Investment Treaties (BITs) and examine the extent to which global trade rules are compatible with the ability to deploy effective capital control regulations. The result of this meeting is a comprehensive report released this month titled Capital Account Regulations and the Trading System: A Compatibility Review, which is comprised of chapters written by experts from around the globe (including Todd Tucker, former Research Director at Global Trade Watch and former editor-in-chief of Eyes on Trade).

The report highlights several alarming areas where trade and investment treaties conflict with and impede the ability to use important regulatory tools such as capital controls.  It goes on to offer several changes that should be made to outdated trade policies to ensure that countries have sufficient policy space to take the regulatory measures necessary to avoid future financial crises.

Unfortunately, despite concerns expressed by members of civil society, economists, policymakers, and various other international experts, the current negotiations of the Trans-Pacific Partnership (TPP) are on track to lock in the antiquated trade model of extreme deregulation, including a prohibition of bans on risky financial products and a restriction on now widely-endorsed capital controls.

Click here to check out the full report.

Don't Be Fooled by Data Tricks: The Case of the Dueling Korea FTA Press Releases

On Friday we sent out a press release exposing the export-chilling, deficit-expanding, job-eroding track record of the Korea Free Trade Agreement (FTA) on the first anniversary of its implementation.  That same day, the U.S. Trade Representative (USTR) sent out a press release singing the export-boosting praises of the Korea FTA.  What could explain this riddle of dueling press releases?   

Some basic data tricks.  USTR’s press release relied on five sleights of hand to gussy up the unsightly Korea FTA data and generate some misleading, albeit rose-colored, conclusions:

• Cherry-picking.  Overall U.S. exports to Korea have fallen 9 percent under the FTA.  USTR first tries to get around this inconvenient fact by simply “disregarding” particularly large exports that declined (e.g. corn) so as to produce a sanitized illusion of an increase in “total U.S. exports.” (By “total U.S. exports” they mean “some U.S. exports, excluding particularly important export sectors that would contradict our argument of a total export increase.”)  USTR saves most of its FTA-touting words for some narrow sectors that were export-increasing exceptions to the export-falling rule of the Korea FTA.  For example, while total U.S. agricultural exports to Korea have plunged 29% under the FTA, USTR spotlighted export rises in specific agricultural products like soybeans and grape juice.  Such “soybean-picking” avoids the essential question: what has been the total effect of the Korea FTA on U.S. exports and jobs?  The inconvenient answer: a loss. 

• Using the wrong timeframe.  The USTR press release acted as if the Korea FTA was in effect for the full 2012 calendar year, though it only took effect on March 15, 2012 (hence the timing of the press release).  The agency errantly compared the full year of data for 2011 with the full year from 2012, claiming the results to be due to the Korea FTA.  This timeframe starts and ends too soon.  An accurate assessment of the Korea FTA’s legacy would begin the data comparison with the first full month in which the FTA was actually in effect: April 2012 (vs. April 2011).  Also, the timeframe would not stop with the end of 2012, but with the most recent month for which we have data: January 2013.  Perhaps USTR decided to omit January because it marked the highest monthly U.S.-Korea trade deficit on record.  Whatever their reasons, the timeframe mistake skews each starry-eyed data point that USTR presents in its release. 

• Ignoring imports.  As per usual, USTR has examined only one side of the trade equation.  The word “imports” doesn’t appear once in their press release.  But in the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under the Korea FTA.  Under the deal, the U.S. trade deficit with Korea has swelled 30 percent, costing tens of thousands of U.S. jobs.  By ignoring rising imports, USTR claims a gain for auto manufacturers under the FTA.  But while U.S. auto exports to Korea have increased by $65 million under the deal, U.S. auto imports from Korea have ballooned by $2.3 billion.  The resulting 18 percent increase in the U.S. auto trade deficit with Korea is a net loss for U.S. automakers, not a net gain. 

• Counting foreign-made “exports.”  USTR once again inflates the value of U.S. exports by counting goods that actually are made overseas – not by U.S. workers.  These “re-exports” are goods made elsewhere that are shipped through the United States en route to a final destination.  To assess what the Korea FTA has actually meant for U.S. jobs, our release eliminated re-exports in calculating the 9 percent drop in U.S.-made exports to Korea under the deal. 

• Forgetting about inflation.  It appears that USTR forgot to adjust its numbers for inflation, an omission that artificially magnifies the value of U.S. exports in 2012 relative to 2011.  All of the data contained in our press release is properly inflation-adjusted to show a truer picture of U.S. exports under the Korea FTA – a picture that unfortunately does not look too pretty without all of USTR’s cropping and airbrushing.    

If we want trade policy that behooves the majority, rather than an expansion of the damaging Korea FTA model, then we have to look honestly at the Korea FTA track record.  If instead we twist the data to make mistakes look like successes, we are binding ourselves to the replication of failure.  

On Anniversary of U.S.-Korea FTA Implementation, U.S. Exports Down 9 Percent, Imports from Korea Up and Deficit With Korea Swells 30 Percent, Undermining Obama Export and Job Growth Goals

Though U.S.-Korea Free Trade Agreement Outcomes Are Abysmal, Obama Pushes for Trans-Pacific and European Agreements Based on Same Model

WASHINGTON, D.C. – The actual outcomes of the U.S.-Korea Free Trade Agreement (FTA) that took effect one year ago, March 15, have been exactly the opposite of what the Obama administration promised, Public Citizen said today. Despite government data once again demonstrating the damage caused by yet another “trade” agreement based on the model of the North American Free Trade Agreement (NAFTA), the Obama administration is trying to sell massive Trans-Pacific and European agreements based on the same model with the same false promises.

U.S. export growth to countries with pacts like the U.S.-Korea FTA has been particularly lackluster; 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 38 percent over the past decade. In contrast to the Obama administration’s promise that the U.S.-Korea FTA would mean “more exports, more jobs,” U.S. goods exports to Korea have dropped 9 percent (a $3.2 billion decrease) since the Korea FTA took effect, in comparison to the same months in the year before FTA implementation. U.S. imports from Korea have climbed 2 percent (an $800 million increase). The U.S. trade deficit with Korea has swelled 30 percent (a $4 billion increase). The January data from the U.S. International Trade Commission show that the U.S. trade deficit with Korea skyrocketed 81 percent above December’s level, topping $2.4 billion – the largest monthly U.S. trade deficit with Korea on record. The ballooning trade deficit indicates the loss of tens of thousands of U.S. jobs.

“I suspect that most Americans are likely to be angry with the politicians who got us into another one of these NAFTA-style deals, rather than surprised at the damaging outcome. Polls show that majorities of U.S. independent, Democratic and GOP voters consistently oppose these deals because they think they are bad for their families and the American economy,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The Obama administration is inviting the public to focus on the debacle of its Korea Free Trade Agreement by using the same failed claims to push a Trans-Pacific FTA with 10 Asian and Latin American nations that is literally based on the Korea FTA text.”

The decline in U.S. exports under the Korea FTA contributed to an overall disappointing U.S. export performance in 2012, placing the United States far behind Obama’s stated goal to double U.S. exports by the end of 2014. At the sluggish 2012 export growth rate of 2 percent, the United States will not achieve the president’s goal until 2032, 18 years behind schedule.

“The data show that these Obama administration-supported FTAs are undermining the national goals set by the president of boosting our exports, reviving U.S. manufacturing and creating American jobs,” said Wallach. “This kind of data makes everyone wonder just why the administration keeps pushing so-called ‘trade’ agreements like the Korea FTA, and now the Trans-Pacific Partnership, that facilitate offshoring, ban Buy American provisions and erode manufacturing jobs, utterly contradicting the president’s domestic agenda.”

Many of the sectors that the Obama administration promised would be the biggest beneficiaries of the Korea FTA have actually been some of the deal’s largest losers. U.S. pork exports to Korea have declined 18 percent under the FTA relative to the same months in the year before FTA implementation, while beef exports have fallen 9 percent and poultry exports have plunged 41 percent. While U.S. auto exports to Korea have increased 7 percent under the FTA, U.S. auto imports from Korea have surged 17 percent, causing an 18 percent rise in the U.S. auto trade deficit with Korea.

Read additional analysis of the government data on U.S. trade with Korea under the U.S.-Korea FTA.

Ecuador Moves to Annul U.S.-Ecuador BIT, Denounces Investor-State System

Chevron is using the investor-state system to avoid paying $18.2 billion to residents of the contaminated Lago Agrio region in Ecuador (pictured above).

As global criticism of the investor-state dispute system mounts, Ecuador is taking concrete steps to secede from pacts that enshrine this system, which exposes the country to direct attacks on its public interest policies from foreign investors.  In 2009, Ecuador formally withdrew from the International Centre for Settlement of Investment Disputes (ICSID), an institution which facilitates foreign corporations' legal claims against sovereign governments' policies. On Monday, President Rafael Correa put forth a bill to request that Ecuadorian lawmakers annul Ecuador's Bilateral Investment Treaty (BIT) with the United States, declaring that such treaties “favor foreign investors over human beings.”

The U.S.-Ecuador BIT binds Ecuador to the controversial investor-state system, which uniquely empowers foreign investors to directly challenge a country’s environmental, health, and other public interest laws by claiming that they violate BIT-created investor privileges and threaten “expected future profits.” These cases skirt national court systems and are instead decided by private three-person tribunals composed of arbitrators who bill by the hour. If a corporation wins, taxpayers of the losing country are expected to foot the bill, with no cap on the awarded amount (and even if a country “wins,” they often have to pay exorbitant court fees).

Ecuador has seen some of the most egregious examples of these cases, so it is not surprising that President Correa would want to protect Ecuador’s citizens from further lawsuits.  For instance, after 18 years of persistence, residents of Lago Agrio in the Ecuadorian Amazon won a historic ruling of $18.2 billion dollars against Chevron for the massive contamination of the region between 1964 and 1990 which is alleged to have caused a cancer epidemic and decimated local indigenous groups.  Instead of complying with the Ecuadorian court’s ruling, Chevron has so far made good on its promise of "a lifetime of appellate and collateral litigation" in order to avoid paying out the award.  To evade justice, Chevron launched an investor-state case against Ecuador under the same U.S. BIT that Correa now seeks to annul.  The tribunal in that case ordered the Ecuadorian government last year to interfere in the operations of Ecuador’s independent court system so as to stop enforcement of Chevron's $18.2 billion penalty. 

To add insult to injury, last October Ecuador was slammed with a record $1.8 billion judgment in a case filed by Occidental Petroleum -– the highest amount to ever come out of an ICSID tribunal. The company launched the case against Ecuador under the same U.S. BIT that Correa hopes to annul.  Occidental asked for billions in damages after the company violated a contract with the government, prompting the government to terminate Occidental's investment as contemplated by Ecuadorian law.  To impose a $2.4 billion penalty on Ecuador's taxpayers (including interest and fees), the investor-state tribunal employed astonishing leaps of logic that a dissenting member of the tribunal described as "egregious." 

Ecuador is not alone in its resistance to the harmful investor-state system. As the “egregious” judgments continue to pile up (tribunals have already awarded over $3 billion to foreign corporations under U.S. BITs and free trade agreements, and more than $15 billion is still pending), more countries are denouncing the investor-state system:

• The Brazilian Parliament has refused to ratify any investor-state agreements.
• India has made a move to abolish investor-state dispute clauses in Free Trade Agreements (FTAs).
• South Africa is re-examining its policy on investor-state disputes and has refused to renew BITs with the EU. 
• Bolivia and Venezuela have also pulled out of ICSID.

Unfortunately, a leaked draft text of the investment chapter tells us that these harmful rules are being replicated and expanded under the Trans-Pacific Partnership (TPP), a NAFTA-style "free trade" agreement currently under negotiation between the U.S. and 10 Pacific Rim nations. Australia, a TPP negotiating Party, has already refused to be subjected to investor-state dispute settlement as part of the deal, and other TPP negotiating Parties have grown increasingly wary of the prospect.  Now more than ever, it is crucial that other countries join the lead of Ecuador, Australia, et al. and refuse to bind themselves to a radical system that puts their environmental quality, public health, and sovereignty at risk.

U.S. Trade Deficit with Korea Soars to Highest Point on Record under FTA

The just-released monthly trade data from the U.S. International Trade Commission reveals an expanding U.S. trade deficit with the world as U.S. exports dropped and imports rose in January, relative to December of last year.  But the deficit picture is even starker for U.S. trade with Korea under the tenth month of the Korea Free Trade Agreement (FTA).  While U.S. goods imports from all countries rose 3% in January, U.S. imports from Korea soared 18%.  While U.S. goods exports to the world slipped 6%, exports to Korea fell 8%.  And while the U.S. trade deficit with the world climbed 21% in January, the deficit with Korea jumped 81%.  January's U.S. trade deficit with Korea topped $2.4 billion -- the largest monthly deficit with Korea on record.  In short, another month of trade with Korea under the Korea FTA has produced another month of remarkably large job-displacing trade imbalances. 

The U.S.-Korea trade imbalances of recent months are remarkable not just in comparison with most other U.S. trade partners, but in comparison to how U.S. trade with Korea looked before the Korea FTA took effect in March of last year.  In nine of the ten first months of the FTA's implementation, including the most recent month, U.S. exports to Korea fell below pre-FTA levels (relative to the same months in the prior year), spelling an overall 9% fall in exports under the FTA.  In six of those ten months, including the most recent month, U.S. imports from Korea exceeded pre-FTA levels, yielding a 2% increase in imports under the FTA.  As a result, the U.S. trade deficit with Korea under the FTA's first ten months is 30% -- or $4 billion -- larger than in the same months before the deal took effect.  The graph below summarizes this none-too-pretty picture for U.S. jobs, depicting the difference between Korea trade levels under the FTA (April 2012-January 2013) and those occurring in the same months one year earlier, before the FTA took effect.  

As Obama administration trade negotiators meet in Singapore this week to hash out the details of the Trans-Pacific Partnership, a massive expansion of the Korea FTA model, they should take a gander at this data. If the Obama administration hopes to fulfill its promise of a rebirth in U.S. manufacturing, a restoration of middle-class wages, and a recovery of decent jobs, it cannot afford to sign another sweeping FTA that expands upon the Korea FTA's sorry track record.  

Florida Gets Organized to Stop the TPP

This guest post comes from Dominique Aulisio, a concerned community member from Lakeland, FL:

Earlier this year, Alisa Simmons, Global Trade Watch’s National Field Director, came to Florida to speak at engagements in nine cities throughout the state to expose and explain the Trans-Pacific Partnership (TPP) agreement. The speaking tour came together thanks to a true grassroots effort on the part of individuals and organizations determined to push past the silence on the TPP from the Obama administration and the media. Together we organized events in Tallahassee, Jacksonville, Gainesville, Orlando, Lakeland, Tampa, Immokalee, Lake Worth, and Miami. At each stop, community members who are aware of the negative impacts of NAFTA or are simply wary of expanding corporate power came out to learn about the TPP.

In Orlando, community members and Central Florida Jobs with Justice met with Senator Nelson and Senator Rubio’s offices. We thanked Senator Nelson for signing onto Senator Al Franken’s (D - Minn) letter concerning jobs and labor standards in the TPP. We asked that both Senators demand a release of the TPP negotiating text for review by Congress and the public. We also asked that they vote “No” on “Fast Track,” which would allow the Obama administration to ram approval of the TPP through Congress, without members having a chance to say what should or should not be in the secretive TPP text.

Throughout the speaking tour stops, we found that most attendees had never heard of the TPP before the tour. Many reacted with surprise and anger when they learned about the provisions the Obama administration is secretly negotiating that give more power to corporations. Many responded with comments about “global corporate governance” and “loss of national sovereignty” when they learned about the private tribunals the TPP will create to allow corporations to sue countries for impacting profits by enforcing their own environmental and labor laws. Participants were stunned when they learned that aspects of the Stop Online Piracy Act (SOPA) are being swept under the rug in the TPP, and that there are provisions included to ease offshoring of jobs, decrease food safety standards, and decrease access to medication. One student at Florida State University said, “It just sounds preposterous that it’s being allowed to happen.”

In each city, participants showed great interest in learning more about the TPP and educating their communities. A truly diverse and vibrant network has sprung up organically to facilitate further trainings and organize demonstrations throughout Florida. Various actions are taking place across the state this week, culminating with a march on Saturday the 9^th, as negotiators meet for the 16^th round of TPP talks in Singapore. We are thrilled that so many people across the state feel as passionate as we do about stopping the TPP, and we invite others across the country to join in on the week of action. Communities in Florida are convinced that the TPP is a bad deal for us here in the States and also find it crucial to show solidarity with people around the world who will be negatively impacted by the TPP. 

Ahead of Singapore Round of Trans-Pacific Partnership Negotiations, U.S. Public Opposition to Deal Grows

More Than 400 Civil Society Groups Call for Transparency and Core Principles for International Economic Pacts, While the AFL-CIO Releases New Organizational Resolution Criticizing Direction and Process of TPP Talks

WASHINGTON, D.C. – With the sixteenth round of Trans-Pacific Partnership (TPP) negotiations slated to begin today in Singapore, opposition to the deal in the United States continues to mount. More than 400 groups representing a diverse range of causes – from labor rights, to environmental conservation, to public health, to Internet freedom and much more – have signed on to a letter to Congress calling the lack of transparency in TPP negotiations “inconsistent with democratic principles” and outlining expectations of how key issues should be addressed in commercial agreements of the 21st century.

Adding to the criticism, on February 27, the AFL-CIO released an executive council statement questioning the current path of TPP negotiations. It stated, “The United States cannot afford another trade agreement that hollows out our industrial base and adds to our substantial trade deficit.” It continued, “We do not need another trade deal that simply boosts corporate profits by encouraging offshoring good jobs while undermining wages, benefits and worker rights. We must do better.”

Members of Congress have been signaling their growing concern with the TPP process and substance with respect to threats to American manufacturing and Buy American procurement preferences, the undermining of Internet freedom and more.

President Barack Obama has called for completion of the TPP, which would be the largest U.S. trade agreement since the 1995 World Trade Organization, by early October. To date, Congress and the public have been denied access to draft texts of the massive pact, which has been under negotiation for three years.

Only five of the TPP’s 29 chapters pertain to traditional trade matters. The rest would set policies to which the U.S. Congress and state legislatures would be required to conform U.S. non-trade policies relating to regulation of energy and other services, financial regulation, food safety, procurement policy, patents and copyright policy, and more.

The draft pact also includes NAFTA-style foreign investor rules that facilitate job offshoring by removing many of the risks and costs of relocating U.S. production to low-wage countries. Among TPP negotiating countries is Vietnam, the lower cost offshoring alternative to China.

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. 

The 12 Questions about the TPP that President Obama and Prime Minister Abe Do Not Want to Hear this Week

Today Japanese Prime Minister Shinzo Abe arrives in Washington for a Friday meeting with President Obama. A hot item on the agenda is the possibility of Japan joining the Trans-Pacific Partnership (TPP), a U.S. NAFTA-style “free trade” agreement currently under negotiation between 11 Pacific Rim nations. Japan is not now involved in TPP negotiations and Prime Minister Abe’s party, the Liberal Democratic Party (LDP), explicitly campaigned against joining the TPP in the December elections that restored Abe and his party to power.

Recent indications that Abe may contradict those campaign pledges have ignited a torrent of criticism within Japan and prompted the Japanese press to flood the Abe administration with tough questions regarding his TPP intentions. Meanwhile, key Obama constituencies, such as the auto industry and unions, have vocally opposed Japan’s inclusion, while U.S. congressional leaders from both parties have expressed opposition to the entire deal alongside consumer, labor, environmental, public health, Internet freedom and other public interest groups.

Here are 12 questions on the TPP that President Obama and Prime Minister Abe do not want to hear during Abe’s visit this week:

For both Prime Minister Abe and President Obama:

• The TPP replicates provisions from prior NAFTA-style agreements that empower foreign investors to skirt domestic laws and courts and privately enforce the terms of a public treaty by directly challenging governments’ public interest policies before foreign tribunals to demand unlimited sums of taxpayer compensation. The premise for including such extreme extra-judicial enforcement procedures in past agreements has been that the domestic legal systems of developing country trade partners have not been sufficiently trustworthy. President Obama, do you see Japan’s domestic legal system as not sufficiently trustworthy, or do you plan to exempt U.S. firms operating in Japan from these investor privileges? Prime Minister Abe, I would ask the same question with regard to the U.S. domestic legal system and Japanese firms operating in the United States.

• The TPP would bar both of your governments from favoring domestic companies with fiscal stimulus, or from requiring that taxpayer dollars be directed toward domestic firms in government procurement. China, meanwhile, remains free to pursue such pro-growth, domestically-focused strategies. If both Japan and the United States intend to compete with China, why would either country benefit from such limiting provisions in the TPP?

For President Obama:

• In your recent State of the Union, you stated a priority of “making America a magnet for new jobs and manufacturing.” Given that wages in Vietnam are approximately one-third of those in China, how do you see the TPP – a NAFTA-style deal with Vietnam – contributing to your manufacturing growth goals for America?

• Japan’s powerful rice lobby has successfully pushed Prime Minister Abe’s party to conditionally reject the TPP unless Japan is granted an exemption from tariff cuts on sensitive products like rice. Vietnam, as one of the world’s largest rice exporters and a TPP negotiating party, is unlikely to accept such an exemption unless the United States grants Vietnam greater access to its own sensitive economic sectors, such as the manufacturing sector that you pledged to expand in your State of the Union speech. How do you expect to simultaneously satisfy Japan and Vietnam and grow American manufacturing?  

• The U.S. auto industry and unions, key supporters of your administration, have rejected Japan’s inclusion in the TPP, citing Japan’s resistance to lowering import barriers on U.S. autos. Have you been able to extract from Japan a commitment to lower these barriers as a precondition to joining the TPP?

For Prime Minister Abe:

• Your party has stated that it is not interested in joining the TPP unless you are guaranteed that there is no precondition that tariffs must be cut on all products without exception. Given that no such assurance has been given, what do you have to discuss with President Obama regarding the TPP?

• Given the LDP campaign pledge to protect the national healthcare system, have you been able to extract from the United States a commitment to exempt Japan from the provisions in the proposed TPP text that would extend medicine patents and challenge national drug formularies?

• Japan’s legal associations have opposed the TPP’s proposed inclusion of investment provisions that would allow foreign corporations to skirt Japan’s laws and courts and directly challenge Japanese domestic policies in foreign tribunals, demanding taxpayer compensation for public interest laws that they claim to be violations of TPP-granted investor privileges. Have you been able to extract a commitment from the United States to exempt Japan from these provisions?

• Japanese consumer safety groups have opposed proposed TPP rules that would require Japan to accept meat, poultry and other food from the United States and other TPP countries that are deemed to have roughly “equivalent” food inspection systems, even if Japan’s specific food safety requirements were not met. Have you been able to extract a commitment from the United States to exempt Japan from these rules?

• Japan’s economy relies heavily on the use of existing technologies to spur innovation and growth. Given that the TPP’s proposed text would significantly expand intellectual property protections so as to inhibit open-source usage of existing technologies, have you been able to extract from the United States a commitment to exempt Japan from these rules?

• Japan’s farm ministry calculates that the TPP would cause a ¥7.9 trillion downfall in Japan’s gross domestic product and the loss of 3.4 million jobs. How do you see the TPP fitting into the economic growth goal that is one of the three pillars of your reform platform? 

• Have you been able to extract from the United States commitments to exclude rice, beef, pork, dairy, sugar or other sensitive agricultural sectors from the TPP’s tariff-cutting requirement, given the intense anti-TPP pressure exerted by the farmers in these sectors who helped return the LDP to power in December?  Have you been able to extract such a commitment for construction, postal services, insurance or other sensitive service sectors that have also opposed the TPP? 

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.

25 U.S. Groups Send Letter to U.S. Trade Negotiator to Call For Civil Society Engagement at Sweeping TPP Talks

Yesterday, 25 prominent labor unions, environmental organizations, faith groups, and other civil society organizations sent a letter to Barbara Weisel, the lead U.S. negotiator for the Trans-Pacific Partnership (TPP), a sweeping NAFTA-style deal proposed to encompass the U.S. and 10 Pacific Rim countries, outlining several demands for increased civil society stakeholder engagement at upcoming TPP rounds.

The groups made several clear-cut proposals for increased stakeholder engagement, requesting that a schedule of stakeholder events be published with advance notice, that stakeholders be granted access to the negotiations venue (unlike at the Auckland round, where civil society was shut out), and that stakeholder presentations be scheduled for a time when negotiations are not in session.

The letter also reiterated earlier demands by civil society that the secret TPP negotiating text be made public.  Below is the full text of the letter.

++

Barbara Weisel
Assistant U.S. Trade Representative for Asia and the South Pacific
Office of the U.S. Trade Representative
Washington, DC

February 4, 2013

Dear Ms. Weisel:

At your most recent briefing with civil society stakeholders on January 10, 2013, you invited civil society organization stakeholders to share with you our desires with respect to stakeholder engagement during the Trans-Pacific Partnership (TPP) negotiating rounds.  We appreciate your willingness to share these requests with the Singapore lead, as well as the rest of the TPP partners who would be hosting upcoming rounds of negotiations.

As U.S. organizations with broad constituencies that will be affected by many aspects of the TPP, we have and will continue to utilize all opportunities to provide input and technical expertise to negotiators.  We believe that such civil society stakeholder engagement with negotiators is critical during the negotiating rounds.  Therefore, we believe that –at a minimum – stakeholder engagement during the TPP negotiating rounds should include the following:

• Hosts should publicize the schedule of stakeholder events and indicative timetable of working groups to enable stakeholders to plan travel with enough advance notice to find reasonably-priced airfare and accommodations.
• Timetable of which negotiating groups are meeting in which rooms should be made available to all stakeholders.
• Stakeholders should have access to venue where negotiations are taking place, including to corridors during coffee breaks.
• Lead negotiators should provide briefings for stakeholders at both the start and end of the negotiating round.  Call-in options should be made available for stakeholders unable to participate in person.
• Space and time should be provided for stakeholder presentations during a day/time when negotiations are not in session.  The rooms for the stakeholder presentations must be large enough to accommodate all relevant negotiators. Stakeholders should be provided with a minimum of 15 minutes for each presentation.
• Any tabling opportunity should also occur when negotiations are not in session and should not occur during the same time as stakeholder presentation sessions.
• Internet access should be made available for stakeholders at the venue.
• A reception for negotiators should be made open to all stakeholders to encourage informal interactions.
• Work space should be provided for NGO stakeholders that includes tables, printers, and a photocopier.
• Hosts should commit to distribute NGO stakeholder documents to delegations in a timely manner.

While we believe that facilitating stakeholder engagement in this way is critical as negotiations advance, we respectfully reiterate our earlier demands for negotiating texts to be made public. USTR has engaged in TPP negotiations for nearly three years without any public access to even the most fundamental draft agreement texts or summaries. This stands in contrast to the negotiation of the multi-country Free Trade Area of the Americas, for which a complete draft composite text was publicly released, and to negotiations related to the WTO Doha Round, for which various proposed agreement texts were also made public, as well as multiple other international negotiating fora. 

This lack of transparency has severely limited meaningful input by civil society and other stakeholders who have a direct and long-term interest in the outcome of these negotiations. Yet, under the trade advisory system, more than 600 official advisors mainly representing business interests have direct access to at least the U.S. proposals and thus, unlike the public and most of Congress, have a greater ability to directly influence the TPP’s terms. Greater transparency and inclusiveness is essential to such negotiations, particularly as the scope with respect to both the subject matter and the countries potentially involved are expanded. The enforceability and permanence of such binding rules, with later changes to an adopted pact requiring agreement by all signatory countries, necessitates maximal transparency and extreme care during the negotiation phase.

Thank you for your attention and for passing these requests and concerns to your counterparts in other TPP countries.

 

Signed:

American Medical Students Association
Columban Center for Advocacy and Outreach
Citizens Trade Campaign
Communication Workers of America
Doctors Without Borders - Access Campaign
Electronic Frontier Foundation
Environmental Investigation Agency
Friends of the Earth
Health GAP
Humane Society International
International Association of Machinists and Aerospace Workers
International Brotherhood of Boilermakers
International Brotherhood of Electrical Workers
International Fund for Animal Welfare
Institute for Policy Studies, Global Economy Project
Just Foreign Policy
Knowledge Ecology International
Oceana
Oxfam America
Public Citizen
Rainforest Action Network
Sierra Club
United Church of Christ, Justice and Witness Ministries
Universities Allied for Essential Medicines (UAEM)
Witness for Peace

 

A Shiny Quarter per Day: New TPP Study Uses Sweeping Assumptions to Project Tiny Benefit

A new study at the Peterson Institute for International Economics predicts that the Trans-Pacific Partnership (TPP) will bring increased income to the U.S. and the world at large.  In so doing, the Institute continues a stalwart tradition of using assumptions-laden computer models to project starry-eyed gains from nearly every NAFTA-style deal it sees.  The frequency of those rose-colored projections is matched by the frequency with which they’ve been wrong. 

The year before NAFTA was implemented, the Peterson Institute’s Gary Hufbauer and Jeffrey Schott projected that the deal would lead to a rising U.S. trade surplus with Mexico, which would create 170,000 net new jobs in the U.S.  Instead, the U.S.’s $1.6 billion trade surplus with Mexico before NAFTA quickly became a trade deficit after the deal took effect.  After nearly two decades of NAFTA, that trade deficit has ballooned to over $100 billion, spelling the loss of hundreds of thousands of U.S. jobs according to the Institute’s own logic.  

Even before the depth of the NAFTA deficit became manifest, Hufbauer recognized that his NAFTA-happy predictions were ill-fated.  Just two years into NAFTA, he told the Wall Street Journal, “The best figure for the jobs effect of NAFTA is approximately zero…the lesson for me is to stay away from job forecasting.” 

It appears that Hufbauer’s colleagues haven’t learned the lesson.  The Peterson Institute’s new study on the TPP, authored by Peter Petri, Michael Plummer, and Fan Zhai, uses similar computer models to conclude that the deal “promise[s] substantial benefits and could lead to…a more peaceful and prosperous world economy.” 

Even if we accept the study’s many sweeping, benefits-aggrandizing assumptions, the supposed TPP income gains touted by the authors are pretty meager.  They predict that the TPP would add $77.5 billion to the U.S. gross domestic product (GDP) by 2025, which amounts to a mere 0.4% increase in projected GDP after over a decade of the deal.  How much money might this idealized picture of the TPP mean for your wallet? 

Twenty-seven cents per day. 

That’s right.  The present value of the additional income that the Institute thinks the TPP will bring to each person in the U.S. in 2025 amounts to a daily gain of: one shiny new quarter.  While the assumptions employed by the TPP-praising study are remarkably optimistic, the promised income gains are surprisingly dull.

Even so, these dull hoped-for gains are overstated.  To arrive at their conclusions, the authors make a litany of assumptions about the TPP’s membership and economic results—assumptions that surpass even what pro-TPP policymakers and business executives have been willing to project.  The authors admit as much in an earlier version of their study, stating, “We are attempting to evaluate the implications of aggressive policy changes rather than to predict probable outcomes.” 

Lori Wallach on the Kluwer Arbitration Blog: Brewing Storm over Extreme Investor-State System

The investor-state system allowed the U.S.-based Renco corporationto demand $800 million of Peruvian taxpayers after the Peruvian government asked the company to comply with its obligation to clean up severe pollution from its metal smelter (pictured here), which has poisoned children in the surrounding community of La Oroya.

Yesterday on the Kluwer Arbitration Blog our own Lori Wallach explained what is fueling the “perfect storm” of opposition to the Investor-State Dispute Resolution system (ISDR).  Under NAFTA-style deals, this radical system provides foreign firms a way to attack domestic health, environmental, and other public interest laws, claim that such public protections threaten their "expected future profits," and demand millons of dollars in taxpayer compensation.  Now the Trans-Pacific Partnership (TPP) threatens to expand the extreme system further.  

Growing rejection of the investor-state rules is a result of many converging factors, including the alarming investor-state text contained in a leaked draft of the TPP Investment Chapter, expansion of the scope of corporations' attacks, and the skyrocketing number of investor-state challenges.

Wallach goes on to explain why the ISDR system is facing scrutiny in many arenas and across political spectrums:

From a conservative perspective, this system poses an unparalleled threat to national sovereignty and solvency, and from a progressive perspective to democratic governance and the public interest polices won through years of struggle. In the past, little attention was paid to the ISDR regime by the vast majority of voters, policymakers, journalists, academics or civil society advocates. Now the results of the regime are awakening diverse interests to a quiet but very troubling transformation of the legal system that has taken place over the last few decades without their awareness, much less consent.

Check out the full blog post here, and stay tuned for part two, which will delve deeper into how concerns over this extreme system have begun to torment the negotations over the TPP.  

WSJ: Forget TPP's Threat to Medicines. "Free Trade is Good for Health!"

Today the Wall Street Journal published an op-ed with the glowing title, “Free Trade is Good for Health.”  The piece gussies up the Trans-Pacific Partnership (TPP) as a healthy dose of medicine for the developing countries that are negotiating the NAFTA-style deal with the U.S. and other Pacific Rim nations.  The op-ed first takes on those who argue that the TPP poses a danger to access to medicines (i.e. the major health and development organizations from nearly every TPP country).  It then frames the deal as part of a benevolent “free trade” legacy which should be given unqualified credit for the wealth health of nations.  The op-ed’s omissions in the first argument are as large as its sweeping conclusions in the second. 

The TPP’s proposed intellectual property chapter includes even greater monopoly protections for pharmaceutical companies than seen in past U.S. “free trade” agreements (FTAs).  The extension of such anti-competitive protections, while safeguarding profits for large pharmaceutical firms, threatens to block generics and elevate the cost of medicines in TPP countries like Vietnam. 

One such protection that has been hotly debated within the TPP context is “data exclusivity.”  The brainchild of the pharmaceutical industry, data exclusivity goes even beyond patent protections by barring generic drug manufacturers from accessing the clinical test data required to market cheaper, generic forms of a drug, whether patented or not, for years.   Should we be concerned about the implications of such corporate protections for the cost of medicines?  Apparently not.  According to the op-ed, such concerns are the handiwork of “scaremongering NGOs.”  (I don’t recall that adjective making it into our mission statement.)  The author, Philip Stevens, argues that data exclusivity for chemical drugs is currently granted in the U.S. for five years, and “the chances that the TPP will lengthen the exclusivity period are very low.”   

But the point is not whether the access-curtailing U.S. data exclusivity periods will be “lengthened,” but whether they will be exported to ten other TPP negotiating countries.  Also, the author neglects to mention the U.S.’s new and significantly longer monopoly protection period of 12 years for biologic drugs—used to treat cancer, heart disease, and other deathly illnesses.  Pharmaceutical companies and their cheerleaders have been calling for this extreme, prolonged generics prohibition to be spread to TPP members, diminishing access to life-saving treatments from Vietnam to Peru. 

Indeed, this corporate push was recently emblazoned on the very same opinion pages of the Wall Street Journal, with former U.S. Trade Representative Charlene Barshefsky calling for the U.S. to use the TPP to export its 12-year exclusion of generics for biologic drugs.  Our own Peter Maybarduk retorted with a letter to the editor, arguing, “It would be cruel to impose this rule on the many people suffering from treatable conditions in the Asia-Pacific region who cannot afford the extraordinary monopoly prices…”

While the TPP’s intellectual property chapter could export the U.S.’s monopoly protections for pharmaceutical corporations, the leaked investment chapter would allow those corporations to directly challenge governments for access-to-medicines policies that they allege as violating the monopoly protections.  The Wall Street Journal op-ed comes on the heels of Eli Lilly’s announcement, detailed in our post last week, that the pharmaceutical corporation plans to use NAFTA to directly challenge the Canadian government before a NAFTA-created, three-person tribunal over the Canadian courts’ decision to invalidate Eli Lilly’s patent.  The courts made the decision after determining that Eli Lilly’s drug had failed to deliver on promised utility.   In response, Eli Lilly is demanding $100 million in taxpayer compensation. 

As we mentioned, but as the op-ed failed to, the TPP goes even beyond NAFTA in empowering pharmaceutical corporations to launch such attacks on access-to-medicines policies.  NAFTA implies that a corporation could claim “intellectual property” as an “investment” protected by the deal, allowing it to demand compensation for government policies alleged to be a violation of that “investment.”  But the TPP makes that possibility explicit by naming “intellectual property rights” under the definition of “investment,” raising the prospect of an increase in Eli-Lilly-like challenges to access-to-medicines policies under the TPP.   

After wiping aside or completely omitting these concerns that the TPP poses a sincere health hazard, the op-ed author framed the TPP as the continuation of a “free trade” legacy that has played a nearly unparalleled role in improving global health standards.  (That’s not my near-hyperbole, but his: “there have been few more powerful forces for improving health in the history of humanity.”)  He reasons that trade means growth in income, which means growth in living standards:

Prior to the 1950s, the majority of the world's population lived a precarious life as subsistence farmers. Since then, the opening of global markets, first by the General Agreement on Tariffs and Trade and then by the WTO, has transformed the health prospects of millions by raising incomes. That, and not IP flexibility, made decent food, sanitation, and new medical technologies available.

That's how the Asian countries involved in the TPP—Malaysia, Singapore, Brunei and Vietnam—have witnessed startling improvements in the health prospects of their citizens since the middle of the last century. Singapore signed GATT in 1973, and by 1993 there were no import duties for any product except alcohol, tobacco and automobiles, a situation that largely persists today. Singapore now surpasses many European countries for life expectancy, with Malaysia not far behind.

Oh my.  Where to begin?  How about Singapore.  The author’s poster child for the trade-equals-growth-equals-health argument turns out to be a pretty counterproductive candidate.  Stevens, the author, cites 1973 as the year Singapore began opening the door to unfettered trade, with the door cast mostly wide open by 1993.  But the years of highest growth for Singapore happened while the door was still closed.  In the decade before 1973, Singapore’s average inflation-adjusted GDP growth rate per person was 9%.  In the decade following its GATT accession, that average growth rate fell to 6%.  In the decade following the declared 1993 free trade finish line, Singapore’s annual per capita growth dropped further to just 3%.  One could be pardoned for expecting Stevens to conclude from his Singapore example that nations looking to boost incomes and health standards should reject across-the-board free trade, not embrace it. 

Singapore’s experience is not unique.  A study by Mark Weisbrot and Rebecca Ray over at the Center for Economic and Policy Research found that from 1960-1980, a period characterized more by import-substitution than by free trade, Latin America as a whole experienced a cumulative growth rate of 92%.  But during the free trade era of 1980-2000, the region’s cumulative growth plummeted to a measly 6% over the entire twenty-year period. 

Such findings, like the Singapore data, do not necessarily mean that free trade causes lower growth.  Other factors could of course be at play in this history.  But the facts show that the opposite certainly cannot be claimed.  Free trade cannot be categorically credited for higher growth, much less recommended as an unmitigated prescription for better health.  Op-eds making such a sweeping claim would seem to be driven more by ideology than by evidence.  Those struggling to pay for medicine in Vietnam could probably do without more ideology.  

Mexican Unions Say No to "Free Trade" Expansion Through the TPP

 

Above: Celeste Drake (AFL-CIO) and Melinda St. Louis (GTW) pose with representatives from Mexican unions and civil society organizations at a seminar on the dangers of the TPP in Mexico City, Mexico.

Last week, Mexico and Canada took part in their first official closed-door negotiations of the Trans-Pacific Partnership (TPP) “free trade” agreement, which the U.S. has been negotiating for the past 2 ½ years with countries in the Asia-Pacific and Latin America. The TPP would expand the North America Free Trade Agreement (NAFTA) model to 11 Pacific Rim countries (and eventually any nation in the Pacific Rim, from China to Russia to Japan, could be included).

In mid-November, Mexican officials hosted negotiators from the 10 other TPP nations in secretive talks in Los Cabos, Baja California. In response, Mexican labor, farmer and fair trade advocates, including the National Workers’ Union (Unión Nacional de Trabajadores--UNT), the National Council of Rural and Fisher Organizations (Consejo Nacional de Organismos Rurales y Pesqueros--CONORP), and the Mexican Action Network against Free Trade (Red Mexicana de Acción Frente al Libre Comercio--RMALC), organized a half day seminar raising concerns about Mexico’s participation in the TPP on November 14 in the Mexican Senate building.

The seminar launched a regional political alliance between partners from Canada (Common Frontiers), the United States (AFL-CIO and Public Citizen), and Mexico (the organizations listed above and others). Senators Fidel Demedicis Hidalgo and Isidro Pedraza Chavez also participated in the seminar and expressed concern about the lack of transparency in the TPP process. The organizers presented this statement to the Mexican press at the end of the seminar (translated below).

Two decades of “Free Trade” is enough: Say No to Expansion through the Trans-Pacific Partnership (TPP)
Statement of UNT, CONORP and RMALC of Mexico
November 14, 2012

"According to the United States government, big business and the Mexican Ministry of Economy, the TPP is the most ambitious free trade agreement that has ever been proposed in terms of the extent of issues it aims to address, but what the enthusiastic promoters of the trade agreement are hiding is that the true intention is to deepen and complete the commitment made by our country in NAFTA and other free trade agreements signed with various countries.

Through TPP the sectors and powers that have benefited from the previous generation of trade agreements will be strengthened and even larger swaths of our economy will be at the disposal of transnational corporate monopolies. This is the trend of the new era of trade liberalization in the 21st century.

Live from Auckland: Lori Wallach Interviewed at TPP Negotiations on Dangers of the Deal

Watch our own Lori Wallach interviewed live from Auckland, New Zealand, on the sidelines of 15th round of the Trans-Pacific Partnerhip (TPP) negotiations, where civil society members have been shut out of the discussion while 600 advisors, most representing U.S. corporations, have unparalleled access to the text. The TPP has the potential to ban Buy America provisions, decrease access to medicine, limit the ability to regulate Wall Street, and empower corporations to directly attack public interest laws. 

Check out the interview here:

IMF Endorses Capital Controls while U.S. TPP Negotiators Try to Ban Them

The International Monetary Fund has now codified a significant policy shift signaled by statements over the past few years: acceptance of capital controls as legitimate policy tools.  Ironically, "trade" policy currently being hatched in Auckland, the site of the current round of Trans-Pacific Partnership negotiations, threatens to move in precisely the opposite direction.

A long and growing list of economists and governments have found capital controls to be an essential component of a policy toolbox to prevent sudden inflows or outflows of speculative “hot money,” the destabilizing impacts of which became manifest in the global financial crisis.  Beyond avoiding the crises that emerge when lemmings-like investors decide to pull funds out of a country en masse, capital controls can also be employed in an enduring form for a range of worthy goals.  These include preventing asset bubbles, forestalling currency appreciation and export deterioration, controlling inflation, maintaining effective monetary policies in the face of procyclical flows, and ensuring a stable climate for long-term domestic investment. 

A paper released this week and approved by the IMF Board (on which the U.S. holds by far the greatest voting power), states the new IMF official policy position: “In certain circumstances, introducing [capital flow management measures] can be useful for supporting macroeconomic policy adjustment and safeguarding financial system stability.” 

The newly official position is not a categorical endorsement of capital controls.  It states that controls should be “generally temporary,” “should not be used to substitute for or avoid warranted macroeconomic adjustment,” and should be considered as a last resort.  Such narrow qualifications have irked countries like Brazil, whose representative on the IMF Executive Board responded to the tepid change by saying, “The extent of the damage that large and volatile capital flows can cause to recipient countries has not been sufficiently recognized.” 

Still, the formalized policy shift, which allows the IMF to actually recommend capital controls in its regular doses of policy advice to troubled economies, contrasts starkly with its history of requiring countries to dismantle capital controls as a lending condition during the free-market-fundamentalist 1990s. 

Trade policy, by contrast, is still stuck in the ‘90s. 

The rules of the World Trade Organization, enshrined in that deregulatory era, bar most uses of capital controls.  The transfers provisions in the WTO’s General Agreement on Trade in Services forbid any country that has committed financial sectors to WTO rules from restricting capital flows in those sectors.  Under a limited exception, countries can enact capital controls during balance of payments crises, though permitted controls may only apply to capital outflows, must be temporary, and must be deemed “necessary” by a WTO body. 

NAFTA-style “free trade” agreements are even worse.  These deals prohibit capital controls without even including the WTO’s very limited caveat for balance of payments crises.  Further, they allow private investors to directly attack a government’s capital control policy, demanding taxpayer money as compensation, via the notorious and increasingly-used investor-state system. The leaked investment chapter proposed for the TPP replicates these same extreme prohibitions on a policy tool backed by a growing chorus of economists and policymakers. 

As the IMF joins that chorus (albeit as one of the more timid singers), U.S. trade officials are left making discordant noises by themselves.  Coinciding with the IMF’s release of its U.S.-approved endorsement of capital controls, this week U.S. negotiators in Auckland are pushing other TPP negotiating countries to lock in the proposed TPP prohibition of capital controls. 

This irony yields a unique diagnosis: the U.S. suffers from capital controls schizophrenia.  It appears that the U.S. officials at the Treasury Department who okayed the IMF policy shift should have a little talk with their counterparts at USTR who are actively undermining said shift. 

If they don’t, and if the TPP is allowed to contravene the solidifying consensus that capital controls are legit policy tools, TPP countries who take policy advice from the IMF may find themselves in a baffling predicament.  What happens if a TPP member like Chile, which successfully employed capital controls during the 1990s, experiences a surge in destabilizing capital inflows, gets an IMF recommendation to stem the flow, but is bound by the TPP not to?   In the 1990s we saw the IMF threaten lending cutoffs for countries that did not adhere to a NAFTA-style system of trade deregulation.  Could we now see that same system threaten investor-state attacks for countries that actually adhere to IMF advice? 

As the IMF position on capital controls begins to more closely align with the policies of many countries, the views of many economists, and the realities of the post-crisis world, the TPP capital control ban pushed by U.S. trade negotiators becomes an increasingly isolated (and continuously senseless) outlier.  

Recap from Lima: What Went Down at the Public Forum on the Renco/Doe Run Investor-State Case

Above: Nearly 150 people attend a public forum in Lima on the injustice of the Renco/Doe Run investor-state case.

Last week we traveled to Lima to participate in several events organized to raise awareness about the injustice of Renco’s $800 million investor-state case against Peru. The U.S. company has launched an investor-state attack under the Peru "free trade" agreement (FTA) on behalf of its subsidiary Doe Run, whose metal smelter in Peru has severely polluted the town of La Oroya (declared one of the ten most polluted sites in the world), leaving the inhabitants to suffer from lead poisoning, air pollution, and water contamination. Now, instead of fulfilling its contractual obligation to remediate the damage, Renco/Doe Run is demanding $800 million from Peru – money that would come out of the pockets of the same people who are already suffering from the horrendous pollution.

One of the most powerful events of the week occurred on Thursday when nearly 150 journalists, activists and community members gathered in Lima to attend a public forum to learn more about the implications of the pollution and the investor-state case for the population of La Oroya.

We were livetweeting over at @PCGTW, but in case you missed it, here are some highlights:

+ Our own Melinda St. Louis, Director of International Campaigns, noted that instead of re-thinking the investor-state system based on the situation in La Oroya, Peru is currently negotiating the Trans-Pacific Partnership (TPP), another trade agreement which will expand investor rights according to a leaked draft of the text of the investment chapter.

+Jose de Echave, Director of CooperAcción and previous Deputy Minister of Peru’s Environmental Ministry, explained how the corporation has not fulfilled its contractual obligations, and noted that the U.S.-Peru FTA is not simply about trade – it also has far-reaching social and cultural implications.

+ Matthew Porterfield, Senior Fellow and Adjunct Professor of Law at the Harrison Institute for Public Law at Georgetown University, discussed several alternative solutions to the investor-state system that other countries have already taken, including withdrawing from the International Centre for Settlement of Investment Disputes (ICSID) (a la Bolivia, Ecuador, and Venezuela), withdrawing from investment treaties (a la Ecuador, and possibly South Africa in the near future), or refusing to be a party to the investor-state provisions of the TPP (a la Australia).

+Rosa Amaro, local leader and president of the Movement for the Health of La Oroya (MOSAO),  gave a moving testimony about the dire situation in her community, including the heartbreaking story of the sick children who are seeking justice, the divisions the situation has caused, and the looming lawsuit which would drain the community of the money it has earned from the company, all as a result of breathing “public” air and seeking dignified work. (Those of you who speak Spanish can find part of Rosa’s testimony here).  

The events in Lima may have ended, but Peru and the community of La Oroya continue to find themselves sickened from the pollution and fighting against an unfair $800 million lawsuit. Now it is crucial that the investor-state system not be expanded through the TPP--we have already seen the damage it can do through the eyes of La Oroya.

Below: Panelists from the public forum pose with members of the La Oroya community, which has been contaminated by Renco/Doe Run's metal smelter.

Concerns about TPP's IP Chapter Grow Among Civil Liberties and Human Rights Groups

As the 14^th round of TPP negotiations begins in Leesburg, apprehension about how the intellectual property (IP) chapter could affect free speech, global health and human rights continues to grow among prominent watchdog groups.

Last week, the American Civil Liberties Union (ACLU) described the TPP as "the latest threat to free speech in guise of IP reform” and criticized the negotiations for lack of congressional oversight.

Amnesty International chimed in on Thursday urging the TPP to “put people ahead of profits” and uphold basic principles of transparency and human rights.  Amnesty particularly stated concern that TPP would raise the cost of essential medicines by "stifling" generics.  For more information on how the IP chapter stands poised to jack up medicine costs, check out Public Citizen's Access to Medicines page.