California Legislature Wants a New Way Forward

The California legislature spoke loudly for fair trade last week. The Senate voted 23-13 and the Assembly 50-29 to rethink the state’s future trade pact commitments by passing AB 1276, a new trade oversight law.

California, perhaps more than any other state, understands that NAFTA-style trade agreements are certainly about more than simply trading goods and services. Unfortunately, Californians have learned this after spending way too many tax dollars warding off corporate claims, totaling nearly $1 billion, against NAFTA challenges of state environmental and public interest regulations including a state ban on gasoline additive MTBE and mining regulations. Under NAFTA, foreign investors are given special rights, among which is the ability to sue governments in a private NAFTA tribunal if the corporation feels that a new regulation/policy affects their bottom line. Just a few months ago, rumblings surfaced of another possible trade challenge against the state’s new low carbon fuel standards.

Even more troubling is that in the midst of painful economic hardship, vital economic development policies like “Buy-local/Buy California,” could also easily fall prey to trade challenges under various trade pact procurement agreements.

Assembly Member Nancy Skinner, author of AB 1276, is fed up with trade rules that hamstring legislators and explained recently:

It has become increasingly clear that international trade rules do affect state sovereignty. Many common state procurement, investment or other policies could be challenged under the rules of various trade agreements. AB 1276 is a step to ensure that while we are encouraging expanded trade, we are also safeguarding the state legislature’s jurisdiction over decisions with respect to non-trade policies.

AB 1276 recognizes that the state’s decision to commit state procurement, services and investment laws to the terms of trade agreements falls under the jurisdiction of the state legislature. Currently, the federal government consults only with the governor’s office which has exercised full decision-making power over state commitments to trade pacts. AB 1276 brings these decisions out of the back room and into a forum where they can be fully vetted and assessed to determine whether or not new commitments will benefit the state.

If Governor Schwarzenegger signs AB 1276 into law, California will join Maryland, Rhode Island, Hawaii, Minnesota, and Maine in establishing a democratic process for deciding whether or not to commit the state to harmful future trade agreement terms.