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Korea FTA Needs Some Fixin'

Nonimmigrant Admissions to the United States: 2009

On Saturday, President Obama announced at the G-20 that his administration will move forward with the South Korea FTA and submit it to Congress for approval soon.  You can read the quick reaction from our own Lori Wallach here.  Today happens to be the three-year anniversary of the signing of the Korea FTA, and we know what that means: the FTA was negotiated by Bush for the benefit of his cronies in big business and before the financial crisis rocked the global economy.  The Korea FTA contains all the anti-democratic NAFTA and CAFTA investor-state lawsuit provisions that allow corporations to sue governments if the governments implement regulations that could reduce their profits (as we’ve seen recently with the El Salvador mining case). 

The Korea FTA also contains extremely deregulatory provisions in financial services which are in some ways more deregulatory than any other trade agreement to date.  This type of financial deregulation is completely inappropriate now that we have witnessed how financial “wizards” can devastate the economy with their wild, unregulated derivatives trading and risky gambling.  Furthermore, it contradicts the congressional efforts underway right now to re-regulate the financial sector.  The dangerous investor-state lawsuit provisions and financial services deregulation in the Korea FTA need to be stripped out before it is brought before Congress.

The Korea FTA, based on the flawed NAFTA model, could also be a disaster for working families.  Several studies on the Korea FTA as it is currently written illustrate the consequences of trying to pass the Korea FTA as it stands:

Dr. Robert Scott at the Economic Policy Institute (EPI) recently released a report on the probable employment impacts of the current version of the Korea FTA. His analysis found that the implementation of the Korea FTA would cost the U.S. about 159,000 net jobs over the next seven years due to a $13.9 billion increase in the U.S. deficit with Korea.

The U.S. International Trade Commission (USITC), an independent federal body that analyzes the likely effects of trade agreements for Congress, also found that the Korea FTA would result in an increase in the total U.S. trade deficit (see Table 2.3 in the report).  The structure of their model does not allow the total number of people employed to vary, so their report does not contain a net job loss estimate to accompany the estimate of the increased deficit. However, the USITC does have sector-by-sector estimates of employment changes, which show that workers in high-paying manufacturing industries will lose in the agreement (see Table 2.4 in the report).  The electronic equipment industry, for instance, will shed up to 0.4 percent of its workers.  The U.S. auto industry is projected to lose about 0.2 percent of its workforce due to the Korea FTA.

Of course, the corporate lobbyists have stepped up with their misleading models that predict job growth. One such study by the Chamber of Commerce predicts that hundreds of thousands of jobs would be created by the implementation of the Korea FTA.  A major problem with the report is that it only mentions the impact, under their model, of the Korea FTA upon exports.  Nowhere does it give an estimate of the increase in imports due to the FTA.  In a study on the economic impact of a trade agreement, you’d expect at a minimum to read estimates of the impact on both sides of trade flows, not just exports.  The Chamber study doesn’t give an estimate of the import impacts and is vague in its methodology section, which leaves the reader wondering if the Chamber study accounted for the effects of rising imports at all. A study failing to account for the rise of potentially job-killing imports would completely miss the mark on the jobs impact of an FTA.  The EPI and USITC studies, which explicitly account for changes in imports, are much more reliable than the Chamber study.

With his announcement to fix the Korea FTA, President Obama has a historic opportunity to chart a new course in trade policy that benefits workers, maintains democratic control over public policy, and promotes economic stability rather than handing more power to multinational corporations and big banks as trade policy over the last 20-plus years has done.  Let’s hope he seizes the moment.


Lori Wallach’s full statement on Obama’s announcement is after the jump:


Continue reading "Korea FTA Needs Some Fixin'" »

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Argentina Dodges Bullet; Policy Space Call Left for Another Day

A World Bank tribunal has annulled a decision that Argentina has to compensate U.S. investors for measures following the flawed privatization of its gas utilities and a later set of economic crisis measures that affected investors in the privatized utility. (You can read the whole decision over at the Investment Arbitration Reporter.)

The original case, known as Sempra v. Argentina, was decided back in 2007. In the case, Argentina claimed that its economic crisis measures were necessary to protect the country's essential security. The Kirchner administration advocated for an interpretation of the U.S.-Argentina Bilateral Investment Treaty (BIT) that countries get to "self-judge" whether and when such national emergencies arise.

The World Bank panel that decided the original case said that, even though evidence was shared that the U.S. and Argentine governments currently favored a self-judging interpretation of essential security provisions, the fact that predecessor governments either didn't favor such an interpretation, or that they hadn't stated so succinctly enough, was grounds for deciding that the measure was not self-judging. (They also noted that panels at the WTO and other fora had regularly butted their nose in domestic regulatory affairs, suggesting that there would be a high bar conceptually for  a self-judging interpretation.)

This annulment panel held back from deciding whether the BIT allows the government of Argentina to be the judge of whether an economic crisis constitutes a threat to the country's essential security. Instead, the annulment panel wrote:

It is true that the BIT does not prescribe who is to determine whether the measures in question are or were “necessary” for the purpose so invoked – whether, in other words, Article XI is or is not self-judging. But if the measures in question are properly judged to be “necessary”, then there is no breach of any Treaty obligation.

In other words, not only might a foreign panel get to decide when a country's future is at risk, but arguably they also get to decide whether a certain response is "necessary" - a very restrictive term of art in trade law that can put pressure on countries to use light-touch or no-touch regulation.

On the one hand, Argentina dodged a bullet in that it does not have to pay off Sempra for its emergency policies. On the other hand, this latest ruling will offer little lasting comfort to anyone that thinks that the people and their democratically elected representatives, rather than panelists operating outside of domestic court systems (who often seem even less deferential to the "political branches" than our own Supreme Court), ought to get to decide when they face a national emergency without being subject to claims to pay off a bunch of well-heeled corporations for the privilege.

Moreover, as the point about the intentions of previous vs. current governments indicates, Reagan and Bush may have found a way to have their pro-corporate legacy outlast even lifetime Supreme Court appointments: the signing of trade and investment pacts with substantive provisions that promote deregulation and corporate welfare that live on forever... even after voters have voted in governments that campaigned on reversing the Reagan-Bush agenda.

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Lords of Economics Act Uneconomically

How much would you be willing to spend on security costs to avoid (in a worst case scenario) $3 million in property damage? Rationally, it would seem like anything up to $3 million is about right, maybe a touch more if there's some sort of compelling argument of a deterrent effect.

According to the New York Times, Canada was willing to spend nearly $897 billion million for the G-20 Summit, which of course comes out of Canadian taxpayer funds. Tax property to save property, in other words, to the tune of a deficit of $894 million in the "property protection" balance.

Here's the Times:

Few Canadians expected that hosting world leaders at back-to-back summit meetings here this weekend would be cheap or convenient. With downtown Toronto a security maze, businesses boarded up and even the beloved Blue Jays baseball team sent packing, the meetings have met all expectations for aggravation.

But it is the cost of providing security that has elicited gasps.

The latest government estimate is $897 million for three days of summitry. That comes to about $12 million per hour, or a total near what the government spends per year in the war in Afghanistan...

Ever since the infamous Battle in Seattle, the World Trade Organization summit meeting in 1999 in which violent street protests led to 600 arrests and $3 million in property damage, security has been a prime concern for international summit meetings. 

As far as I know, the broken Starbucks windows and spraypaint in Seattle were the worst property damage in a U.S. global justice protest. Since that time, it's been an escalating war of expenditure to see which locality hosting a Summit can spend the most on Robo Cop uniforms and fancy gadgets. (And, as the Times reports with respect to Canada's G-20 summit, all the Robocoppery didn't even have a deterrent effect, and didn't keep property from being damaged.)

Meanwhile, economics ministers are forgetting everything they know about macroeconomics and getting out of economic downturns, and are turning to cutting social spending. As Paul Krugman writes, this could be paving the way for a Third Great Depression.

The lords of economics ain't so economical.

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Space to Watch for WTO Litigation

Graham Bowley had an interesting piece in the New York Times over the weekend about substantive and attitudinal differences in new bank regulation in the US and Europe. Here's what he wrote:

Germany has already initiated a partial ban on naked short-selling, and the European Union is formulating a much tougher crackdown than the United States on hedge funds and private equity firms, possibly even down to stipulating in precise terms how much leverage they can take on. It is also designing an ambitious pan-European financial supervisory authority that would create a common rule book for national banking supervisors but whose powers could also supersede them in some areas.

Kay Swinburne, a member of the European Parliament, said this step is “more dramatic” than the American supervisory reform, which foresees a council of regulators to watch for systemic risks, though oversight will continue to be divided between regulators.

Still, while in some specific areas Europe may be going beyond the United States, in broader areas European leaders are favoring much more limited action. There is likely to be no widespread European version of the Volcker rule, for example, according to Agnès Bénassy-Quéré, an economist and the director of Cepii, a research group in Paris — mainly because of the conviction that the cause of the financial crisis was risky trading by American institutions. In European eyes, European banks did not discredit themselves and so should not be meddled with.

For that same reason, while the United States favors requiring banks to set aside significantly more capital as a cushion against future losses, some European countries are fighting this. The move would be expensive, and German leaders, in particular, feel this would unfairly punish their banks for a problem caused by American banks — despite much evidence, according to analysts, that the European institutions, too, were involved in the free-wheeling culture that got the world economy into so much trouble.

While the WTO allows countries to have different regulations, it does require countries to limit the types of regulation they have in similar ways. And global banks despise different regulation, so they're likely to mine the policies that are different from one another for possible WTO violations. In fact, we've already seen rumblings of governments preemptively using the corporate talking points.

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TPP Talks: Second Round, Square One

Last week, the second* round of talks in the Trans-Pacific Partnership (TPP) negotiations were held in San Francisco.  Although generally the negotiators are tight-lipped about what is happening at the negotiating tables behind the closed doors, a few snippets of information have trickled out.  A big open question going into these first rounds of talks has been how to handle the tangled “spaghetti bowl” of existing trade agreements between the TPP negotiating partners. The U.S. alone has FTAs with four of the TPP countries already.  In total, there are 11 FTAs already in force between all the countries (to see a list of the 11 agreements, check out page 5 of our January comments on the TPP).  So, do you throw out these trade agreements and start from a clean slate, leave them intact and negotiate around them, or do something in between the two?

Well, we’ve already had two rounds of talks and the negotiators can’t yet decide on this fundamental issue, according to Inside U.S. Trade (subscription only).   The USTR favors keeping the existing agreements intact, but Australia, New Zealand and Singapore want to re-open all the old rules in those agreements for the TPP:

[Australia, New Zealand and Singapore] would all prefer plurilateral market access negotiations between all TPP members that would result in a single, unified market access schedule. Through this approach, it would be at least theoretically possible to establish common tariffs among TPP members, sources said.

Likewise, those countries would prefer to “reopen” existing FTA market access schedules. Under this approach, everything would be on the table, and Australia could look to increase its sugar market access into the U.S., even though sugar was excluded from the U.S.-Australia FTA.

Given these difficulties over even the basic structure of the TPP, it seems unlikely that a TPP will be signed before November 2011, which is when the lobbyists for big business want it finished. There may be a reason why the big business lobbyists want the negotiations to be finished so quickly.   They just want the old awful NAFTA text to be copied and pasted into the TPP, which won’t take long at all. However, if the Office of the U.S. Trade Representative (USTR) fulfills President Obama’s campaign promises and negotiates for an agreement based on a new pro-worker, pro-environment trade model, it won’t be as quick as the good old copy-paste that we’ve seen with the recent FTAs.

Meanwhile, the USTR has tried to tout the alleged economic benefits of the TPP, claiming that “The Trans-Pacific Partnership offers tremendous opportunities for U.S. exporters,”  but in reality the TPP is small potatoes economically. Of the seven countries that are chatting in San Francisco this week, four of them (Australia, Singapore, Chile, and Peru) already have an FTA with the U.S. in force.  The remaining three (Brunei, Vietnam, and New Zealand) constitute only 14 percent of the total GDP of the TPP negotiating partners (excluding the U.S.).  To put the economic consequence of these nations in sharper relief, these three countries combined account for less than one half of one percent of global economic activity. 

Given these facts, the USTR should recognize that the most important role of the TPP in U.S. trade strategy will be in changing the FTA model rather than having a big economic impact.  The USTR should ensure that any TPP text will include strong environmental and labor protections and exclude harmful invest-to-state lawsuit provisions, unreasonable drug patent restrictions, and financial service deregulation.

*In reality, the Bush administration participated in three rounds of TPP talks with Brunei, Chile, New Zealand, and Singapore in 2008, seeking to deregulate financial services – all the more reason for the USTR to start from scratch with a new trade model.

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Drug Trials Abroad Keep Auditors Away

FDA logo We’ve seen manufacturing jobs, IT jobs, customer service jobs, and engineering jobs offshored.  We can now add prescription drug trials to that list. The New York Times reports:

Medical ethicists have worried for years about the growing share of new drugs whose human trials took place in foreign countries where federal auditors could not make sure patients were protected, but no one knew how big the potential problem was.

But according to a report by Daniel R. Levinson, the inspector general of the Department of Health and Human Services, 80 percent of the drugs approved for sale in 2008 had trials in foreign countries, and 78 percent of all subjects who participated in clinical trials were enrolled at foreign sites....

The report “highlights a very frightening and appalling situation,” said Representative Rosa DeLauro, Democrat of Connecticut. “By pursuing clinical trials in foreign countries with lower standards and where F.D.A. lacks oversight, the industry is seeking the path of least resistance toward lower costs and higher profits to the detriment of public health.”

Sure, testing the drugs in lower-income countries is cheaper, but how sure can we be that the trial subjects are giving informed consent when foreign drug trial laws are often weaker than U.S. laws?  And how easily can the FDA audit a foreign testing site to ensure that the trial followed all correct procedures? Not very easily. In fact, the Inspector General’s report found that the FDA was 16 times less likely to audit foreign sites than they were to audit a domestic site, partially due to the high cost of auditing foreign sites.  It’s crucial that the FDA be able to verify that proper clinical procedures are followed. Otherwise, drugs that are unsafe or ineffective could be put on the U.S. market, endangering people’s lives.

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Panama's Latest Tax Moves Way Off the Mark

Inside U.S. Trade recently reported that:

Panama is moving toward removing itself from a list of uncooperative tax haven countries compiled by the Organization for Economic Cooperation and Development (OECD), which requires the implementation of 12 Tax Information Exchange Agreements (TIEAs) or Double Taxation Treaties (DTT) with full tax information exchange provisions, an OECD official said this week.

Panama’s status as a tax haven has become a major stumbling block to congressional passage of the U.S.-Panama free trade agreement.

According to Jeffrey Owens, Director of the OECD’s Center for Tax Policy and Administration, Panama “has been making progress” toward removal from the OECD list by completing talks on DTTs that include model OECD information exchange commitments.

At a June 7 Washington event hosted by the U.S. Council for International Business (USCIB), Owens said that “the next stage for Panama is to actually implement those agreements and that is something we are going to be monitoring.”

Panama may have 13 DDTs in place in a matter of months and become a serious candidate for removal from the OECD list, according to the Panamanian Embassy.

An embassy official said Panama has now signed a double taxation treaty with Mexico and has completed but not signed double taxation treaties with Italy, Belgium, Barbados, Holland, Spain, Qatar and France. Negotiation meetings are scheduled “in the coming months” with Luxembourg, South Korea, Singapore, Ireland and the Czech Republic, according to an embassy official.

No one should be fooled about Panama's latest "non-response" to the criticisms of its tax haven practices: no bilateral trade agreement with Panama – a leading tax and regulatory haven – should be voted on until the country decisively addresses its financial secrecy practices, and the United States ensures that tax haven accountability mechanisms are fully insulated from trade pact challenge.

Continue reading "Panama's Latest Tax Moves Way Off the Mark" »

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Writing on WTO Deregulation Gradually Improving

For folks like myself who come from a social science background (not to mention those that come from a hard science background), one of the most striking aspects of writing on NAFTA-WTO style rules is the relative predominance of negotiators, former negotiators, paid arbitrators, WTO staffmembers (past and present) and corporate-backed research in the literature.

In most other fields, the answers to questions like "Should there be a GATS?", or "Should the GATS be written in a more clear fashion?" or "Whose interests does the GATS serve?" would be resolved via sound reporting techniques, a dialetical method, or at least an examination of a broad range of existing and opposing viewpoints and sources. In the social sciences, the conclusions of writers or publishers with an economic (not to mention ideological) interest in certain points of view would be discounted, rejected out of hand, or at least examined exhaustively against contrasting viewpoints.

As we argued here and here, recent interventions by the USTR, WTO Secretariat and several practitioners do not meet these standards for investigation. This is hardly a revolutionary insight, since Kalypso Nicolaidis and William Drake made the same conclusion back in 1992: the "academic" work of elaborating the notions of "trade in services" was conducted by ideological and corporate campaigners that favored the GATS, which broke sharply with established ways of thinking about the proper place of regulation.

Despite all this, some academics and practitioners are stepping up to the plate and asking some of the tough questions. Regis Bismuth, an international law expert at the Sorbonne, recently wrote a piece in the Journal of World Trade entitled: "Financial Sector Regulation and Financial Services Liberalization at the Crossroads: The Relevance of International Financial Standards in WTO Law."

Bismuth addresses a key question we pose in our memos: do WTO rules state - or have WTO tribunals made interpretations that assure - that any policy that is ruled kosher by the so-called “international financial regulatory bodies” (like the Basel Committee for Banking Supervision, the International Monetary Fund (IMF), etc.) is automatically allowable under the GATS, and that the WTO just imports the definitions and disciplines of these more knowledgeable bodies? Financial reform advocates - both in and out of Congress - would be given a lot of comfort if the answer to this question were yes.

But the Bismuth study shows that, to the contrary, the WTO has failed to incorporate these standards, and may indeed conflict with them.

There have been several attempts, as the study documents, to give the WTO stamp of approval to Basel standards, and several countries have apparently been pressured to adopt these standards as part of their accession process or trade policy reviews - even despite the shortcomings of the existing Basel approaches.

But some developing nations and offshore financial centers (also known as tax and regulatory havens) have resisted even the inadequate Basel standards being read into the GATS.

The first proposals of the Basel Committee members within the CTFS principally aimed to prevent large emerging economies such as China or Brazil from adopting prudential regulations with protectionist purposes and complicating the establishment of foreign fi nancial institutions in these countries. On the contrary, the underlying idea of Antigua’s proposal was to consider that the Basel standards, among others, were likely to constitute discriminatory and unjustified measures since, when transposed into domestic regulations, they would complicate the capacity of the financial institutions of these small developing countries to supply financial services abroad.

In fact, as Bismuth notes, the Basel standards might "not pass the test of Article VI:5 GATS", which requires that:

5.        (a)         In sectors in which a Member has undertaken specific commitments, pending the entry into force of disciplines developed in these sectors pursuant to paragraph 4, the Member shall not apply licensing and qualification requirements and technical standards that nullify or impair such specific commitments in a manner which:

(i)        does not comply with the criteria outlined in subparagraphs 4(a), (b) or (c); and

(ii)        could not reasonably have been expected of that Member at the time the specific commitments in those sectors were made.

(b)        In determining whether a Member is in conformity with the obligation under paragraph 5(a), account shall be taken of international standards of relevant international organizations(3) applied by that Member. [Footnote (3) reads: "The term “relevant international organizations” refers to international bodies whose membership is open to the relevant bodies of at least all Members of the WTO."]

Bismuth also notes that the WTO hasn't officially interpreted the meaning of the prudential measures defense language, but that various unofficial practitioners favor certain interpretations, although various delegations have opposed those favored interpretations.

He lays out one possible reform of GATS:

By no means, domestic regulations based on Basel standards should be regarded as illegal or deemed to pursue non-prudential objectives. While national measures based on IOSCO or IAIS standards should be irrebuttably presumed consistent with the GATS, the non-recognition of the Basel Committee only means that domestic regulations based on its standards do not enjoy the same ipso jure presumption of validity. Pushing the analysis one step further, this issue raises the delicate question of whether a WTO court owes any deference to the Basel Committee standards. Plurilateral regulatory strategies have been regarded in a more favourable light by the Appellate Body than strictly unilateral ones. In our view, there should be a rebuttable presumption that domestic regulations based on international norms devised in a plurilateral context involving the major economies and establishing the conditions of a level playing field in the banking sector are deemed adopted for prudential reasons and, consequently, consistent with the GATS.

Interesting idea. Should definitely go on the list of reforms up for debate.

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Lori Wallach discusses Obama's National Export Initiative on PBS

Click here to watch Lori Wallach, director of Public Citizen's Global Trade Watch, on the PBS show Ideas in Action. She discusses President Obama's National Export Initiative.

Lori on PBS Ideas In Action

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Take the Money and Run to Mexico

Shuttered auto plant Back in December 2008-June 2009, American taxpayers saved General Motors and Chrysler with a $62 billion slice of the TARP bailout money.  The rationale for this policy was that allowing the auto giants to fail would put thousands of Americans out of work.

GM and Chysler have found an interesting way to repay us for our generosity: moving American jobs to Mexico, with help from NAFTA. Bloomberg reports:

Mexico’s share of North American auto production may rise at a quicker pace as General Motors Co., Ford Motor Co. and Chrysler Group LLC seek out workers making less than 10 percent of what their U.S. counterparts earn….Mexico’s gains will come at the expense of workers in the U.S. and Canada, said Dennis DesRosiers, president of DesRosiers Automotive Consulting Inc.

As Bloomberg reports, GM has invested $3.8 billion in new and existing Mexican plants since November 2007 while closing five U.S. auto plants since June 2005.  

NAFTA’s elimination of U.S. tariffs against vehicles produced in Mexico has given the taxpayer-supported auto manufacturers an incentive to fire workers in the U.S. and move production to Mexico. Bloomberg reports:

In addition to labor costs, automakers are attracted to Mexico because of the North American Free Trade Agreement and the country’s proximity to the U.S., Robinet [vice president of global forecasting for CSM Worldwide] said.

U.S. autoworkers have been hit hard by the Clinton-Bush trade policy. Between 2001 and 2008 alone, the number of auto manufacturing jobs in the U.S. declined by 28 percent.  

It’s pretty disgraceful that these automakers who were bailed out by the American taxpayer are siding with NAFTA rather than American workers.

(Thanks to Flickr user Bob Jagendorf for the photo of a closed auto plant in Detroit.)

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It's a Family Affair for Death Squad President

Colombian President Alvaro Uribe's post-retirement life just got more complicated. The Washington Post has published new allegations that the reluctantly outgoing Latin American leader and his brother are integrally linked to paramilitary death squads that kill civilians, trade unionists, and community leaders.   Uribe protest2

The Post brings us up to speed and drops the new bomb:

But Uribe's government has also been tarnished by scandals, including accusations in congressional hearings that death squads hatched plots at his ranch in the 1980s and revelations that the secret police under his control spied on political opponents and helped kill leftist activists.

Now a former police major, Juan Carlos Meneses, has alleged that Uribe's younger brother, Santiago Uribe, led a fearsome paramilitary group in the 1990s in this northern town that killed petty thieves, guerrilla sympathizers and suspected subversives. In an interview with The Washington Post, Meneses said the group's hit men trained at La Carolina, where the Uribe family ran an agro-business in the early 1990s. 

Regular EOT readers will not be surprised that Uribe's death squad links continue to surface. But the most recent incidents of death threats shocked even me. As Dan Kovalik notes on the HuffPo:

On May 13, 2010, staff from the Washington Office on Latin America ("WOLA"), a D.C.-based human rights organization, met with long-time Colombian Ambassador Carolina Barco at the Colombian Embassy in Washington. At this meeting, WOLA staff, including Gimena Sanchez, expressed their concern for the safety of a number of its human rights partners in Colombia who, in the words of WOLA, have been victimized by "threats, sabotage of activities and baseless prosecutions." WOLA is taking the threats against its partners very seriously as a number of leaders from social groups, particularly from Afro-Colombian and Indigenous groups, have been killed in recent months.

On May 14, the very next day, WOLA received a death threat directed to itself as well as 80 other Colombian human rights, Afro-Colombian, Indigenous, internally displaced and labor rights organizations and individuals. See, WOLA Press Statement. This threat, from the Colombian paramilitary group known as "The Black Eagles," stated: "as so called human rights defenders don't think you can hide behind the offices of the Attorney General or other institutions . . . we are watching you and you can consider yourselves dead." As WOLA noted in an open letter dated May 17, The Black Eagles go "on to falsely accuse the listed organizations of having links to the FARC guerillas and as such declaring themselves military targets."

If this doesn't suggest that the Colombian diplomatic and government structure in corrupted to the core, I don't know what does. Such a brazen threat against a U.S. based human rights group suggests  paramilitary armed groups are feel emboldened, not restricted, under Uribe's so-called 'Anti-Democratic InSecurity" policy.

As Uribe leaves office he loses institutional power and teflon political veneer. It makes you wonder what other evidence of Uribe's linkages to human rights atrocities will surface, and if he'll ever see his day in court. It also makes you wonder what why some in Congress could see anything but continued human rights tragedy resulting from ratifying a failed trade policy with a country where links to atrocities already run straight to the top.

(Hat tip to, and a single tear for, maestro photographer and former GTW staff, Brandon Wu. The photo credit - his first EOT hit since moving on toward grad school - is all his)

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CAFTA Case Challenges Mining Laws

Pit-mine Earlier this week, an arbitration panel at the World Bank heard the first round arguments of the first environmental case under the investor-to-state arbitration mechanism of the Central America Free Trade Agreement (CAFTA) to date.  The case stems from Pacific Rim’s bid to establish a gold mine in the basin of El Salvador's largest river, Rio Lempa.  Pacific Rim planned to use hundreds of tons of cyanide and hundreds of millions of liters of water per year to recover the gold from the ore, threatening the water resources that thousands of people rely upon.  

Initially Pacific Rim possessed a permit to conduct exploration activities near Rio Lempa, but regulations required it to submit a feasibility study and gain government approval before it could begin actual exploitation of the mine.  Although Pacific Rim applied for an exploitation permit, it failed to submit the feasibility study.  In the face of growing opposition, Pacific Rim

never completed a feasibility study necessary to obtain an exploitation permit for its mine and the government did not issue the exploitation permit.

In December 2008, Pacific Rim formally launched a CAFTA claim for hundreds of millions of dollars in compensation, claiming that El Salvador’s actions constituted discriminatory treatment and expropriation of its investment.  CAFTA’s investor-to-state dispute settlement provision is very similar to NAFTA’s investor-to-state provision in which foreign corporations can claim damages if a government action, including environmental regulations, constitutes expropriation of an investment or discriminatory treatment. Under NAFTA, several environmental and public interest laws have been challenged in the United States, Canada, and Mexico (see our page on these cases here for more info).  It seems that trade negotiators did not learn the lesson from NAFTA and included this investor-state provision in CAFTA, opening the door to outrageous challenges to essential environmental laws like we now see in the Pacific Rim case.

On Monday and Tuesday the tribunal at the World Bank heard Pacific Rim and El Salvador wrangle over El Salvador’s preliminary objections to the case proceeding. Lawyers for El Salvador argued that El Salvador was properly following its own mining laws and that these laws apply equally to all mining companies so they cannot be discriminatory.  Lawyers for Pacific Rim, on the other hand, mostly argued procedural questions.  The arbitration panel is expected to render its decision by August 2nd, at which point either the case will be dismissed or hearings on jurisdiction and standing will proceed. A video of the hearings can be viewed here.

You can take action to ask President Obama to exclude these investor-to-state arbitration provisions from future trade agreements here.

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In Which GATS Gang Calls Each Other and Decides GATS Gang Not a Problem

Over at IELP, Simon Lester has written some reactions to our recent memo to the Senate Finance Committee on the conflict between financial services regulations and the World Trade Organization's (WTO) General Agreement on Trade in Services (GATS).

Simon agrees with our take that the GATS language is vague, hard to pin down, unclear, and could benefit from clarification. He walks through a clever thought experiment, trying to guess how tribunals might look at the question of whether a measure taken for prudential reasons could be found to violate the GATS, and whether a means-ends test would be applied, etc. Would a tribunal view the prudential measures language as analogous to GATT-style exceptions and go through a similar chapeau-to-obligation procedure? Good question. The fact that even highly informed readers have to make that type of leap suggests that there is room for revising the language, as we suggest.

But the comments to Simon's post suggest that the overly self-referential methods of what I'll call the GATS Gang are blinding them to incoming data.

Continue reading "In Which GATS Gang Calls Each Other and Decides GATS Gang Not a Problem" »

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GTW's Todd Tucker on C-SPAN Today

Click here to watch Todd Tucker discuss NAFTA's legacy on C-SPAN's Washington Journal.

Todd on CSPAN 6.1.10

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