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Poll finds unfair trade a top concern

The latest Wall Street Journal / NBC News poll came out, and it finds that unfair trade policies are a top concern of Americans. According to the WSJ's Janet Hook:

A new Wall Street Journal/NBC News poll released Tuesday found outsourcing was the top factor cited by Americans as the cause of the country's continuing economic distress.

Eighty-six percent of those surveyed said outsourcing of jobs by U.S. companies to low-wage foreign countries contributed to economic sluggishness. Among other factors cited, 76% pointed to corporate profit-seeking and 72% blamed high health-care costs.

The poll also found that 53% of respondents believe free-trade agreements have hurt the U.S., up from 30% in late 1999. The shift was mostly attributable to a change in thinking by upper-income people, according to the poll.

Find the full results of the poll here. It also finds that 69 percent of Americans think that "free trade agreements between the United States and other countries cost the U.S. jobs." This is a new high.

Also, on the overall impact on the U.S., those that feel that it's been damaging constitute 53 percent of Americans, as Hook notes. Also interesting is that those that find no real impact from trade deals have overtaken those that feel that they've been a benefit.

And, in the question on the top cause of the recession, the only causes that got a majority of support were related to corporate greed, not excessive regulation.

The poll also finds that over 70 percent of Republicans self-identify as Tea Party fans, while Hook's reporting also shows that all the Senate GOP (plus Democratic Senators Max Baucus, Mark Warner, Jon Tester and Ben Nelson) voted to uphold tax loopholes that encourage offshoring.

These findings mean that, a) a lot of Tea Party adherents are concerned about unfair trade; and b) that most Democratic-leaning folk are very concerned about unfair trade.

In a tight election year, these findings would seem to recommend not picking up Bush-negotiated, NAFTA-style deals, no?

(NOTE: Public Citizen has no preference among candidates for public office.)

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FAIR's "CounterSpin" and The Thom Hartmann Program Feature Our FTA Export Penalty Report

CounterSpin, Fairness and Accuracy in Reporting's (FAIR) nationally-syndicated radio show, airs its interview with our research director, Todd Tucker, today. It sets the record straight about our new report, "Lies, Damn Lies, and Export Statistics." You can listen below; the segment begins at 18:19.

TNT on FAIR's CounterSpin, 9.24.10

Todd was also on the Thom Hartmann Program last week talking about the report. Check it out; the segment begins 1/3 of the way through.

TNT on Thom Hartmann, 9.17.10


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Post-Crisis Cage Match at the WTO

Last week at the WTO Public Forum, experts discussed the ways in which the WTO may be standing in the way of financial reform. In a session organized by the Our World is Not for Sale network, Lori Wallach took the stage alongside Hamid Mamdouh, Director of the WTO’s trade iSpiderman v. hulk2n services, Pedro Paez, former Ecuadoran minister of economic policy and member of the United Nations “Stiglitz” commission of experts on international financial and monetary reforms, and Ellen Gould, researcher from the Canadian Centre for Policy Alternatives.

Wallach and Mamdouh, who have argued behind closed doors about whether WTO provisions restricting regulation could undermine financial regulation reforms, brought their debate public before over 100 audience members, including WTO committee chairs, ambassadors, negotiators, UN officials and NGOs.

Paez, who spoke next, underscored the need for financial regulatory reform and discussed how failing banks and speculative practices in the north pose serious risks for developing countries as well. Gould concluded the program by debunking the frequently touted example of Canada as the posterchild for WTO financial services liberalization -- claims are often made that Canada fully regulated the financial sector, thus escaping the worst of the financial crisis, while also fully liberalizing financial services at the WTO. In her recent report, Gould found that Canada, although under severe pressure to fully liberalize, did not, in fact, make extensive WTO commitments in the banking sector, and was therefore fully free to regulate responsibly.

Listen here to the full WTO Public forum session, “How Do GATS Rules Relate to Countries’ Post-Crisis Financial Regulatory Policies?”

We can only hope that the corporate chieftains at tomorrow's Global Services Summit heed some of the warnings about flawed trade pact deregulation terms highlighted in last week's Geneva debate.

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Export Cabinet Report Ignores Job and Export Predictions of Bush Trade Deals

The Obama administration released its Report on the National Export Initiative last week, with 74 pages of plan on how to make the president's plan of doubling exports in five years a reality.

These agenda items range from the no-brainers (overseas trade missions) to the non-starters (passing Bush's NAFTA-style trade deals).

These trade deals pose a major political problem for Democrats in an election year, as Lori Wallach wrote in Huffington Post last week. But they also are unlikely to perform as promised by the president's Export Promotion Cabinet: as our recent report shows, exports to our FTA partners are growing less than half as fast as those to our non-FTA partners.

Moreover, key parts of the report give a fairly misleading interpretation of the likely job and export implications of Bush-era, leftover trade deals.

For instance, on pages 3-4, the report explores areas where "the Export Promotion Cabinet has made significant progress to implement" the president's goal. On example is:

Reinforced efforts to remove trade barriers... At the G-20 Summit in Toronto, President Obama announced that he had instructed Ambassador Kirk to begin discussions with his Korean counterpart to resolve outstanding issues with the United States - Korea Free Trade Agreement (FTA). The Korean FTA would increase goods exports by an estimated $10-11 billion, which would support an estimated 70,000 jobs. The gains from the agreement could significantly exceed this estimate when reductions in non-tariff barriers and increases in services exports are included.

However, as my colleague Travis McArthur blogged about last month, this claim conveniently omits the government's official projections that 60 percent of even this bilateral gain would be washed away by imports. Moreover, the USITC, the source for these numbers, found that the U.S. global trade deficit would actually increase under the Korea FTA.

On pages 6-7, on the priorities going forward, the Export Promotion Cabinet lists:

Concluding an ambitious, balanced, and successful WTO Doha Round that achieves meaningful new market access in agriculture, goods and services.
Concluding the Trans-Pacific Partnership (TPP) Agreement to expand access to key markets in the Asia-Pacific region.
As we wrote earlier this summer, even the pro-WTO Peterson Institute predicts that the current Doha Round proposals will increase the U.S. trade deficit. As for the TPP, the U.S. already has trade deals with four of the seven countries, which combined account for 86 percent of potential bloc's GDP.

Nonetheless, the advocacy for the Korea FTA, TPP and Doha Round continue throughout the Export Promotion Cabinet's report. (For instance, on pages 13-14, and 47-48).

Continue reading "Export Cabinet Report Ignores Job and Export Predictions of Bush Trade Deals" »

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GAO Finds U.S. Market Share Dropping in Certain FTA Partners

As we reported last week (see here and here), corporate lobbyists seem none-too-happy at the release of our report, "Lies, Damn Lies and Export Statistics." In the report, we show that the export growth rate to our trade pact partner countries is significantly lower than that to other countries.

The Chamber of Commerce responded by citing a number of statistics from the GAO that they argued undermined our case. But not only did the GAO conduct a very different exercise than our own, but it turns out that the Chamber was selectively quoting the GAO study, which actually makes a number of very damaging points about our FTAs with Jordan, Morocco, Chile and Singapore.

How was the GAO study different? First, they did not compare the entire batches of FTA and non-FTA countries, but just plucked four of the FTA partners. Second, they did ask a question we didn't ask, which is what happens to the United States' market share in our FTA partners after implementation.

You can find the original report here, but let me pull out some interesting quotes from the report that you won't find on the Chamber's blog, after the jump...

Continue reading "GAO Finds U.S. Market Share Dropping in Certain FTA Partners" »

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Lobbyists Pick "Eat, Pray, Love" over Report Discrediting their Major Trade Claim?

I am just getting back from vacation, so I understand the temptation to pick up a bestseller rather than more policy analysis. At my job, however, I'm expected to read reports that affect our major work projects. "Twilight" has to be left for the nighttime. Some members of top corporate lobby groups don't seem to be getting the same bang for their buck out of their member dues, according to reporting today from Inside U.S. Trade.

As we wrote earlier in the week, the Chamber and NAM have latched onto the bizarre response to our study that they don't like our methodology for calculating the trade deficit, even though we use the same method that the U.S. International Trade Commission uses - the government's non-partisan trade analysis agency. According to today's Inside U.S. Trade:

Vargo defended NAM's methodology, arguing that the Public Citizen calculations are "illegitimate" because they inflate import numbers while keeping export statistics low. They do so by subtracting re-exports from total U.S. exports while still counting these items on the import side of the ledger, according to Vargo. He argued if the report wanted to exclude re-exports, then it also had to subtract the value on the import side because those goods are not imported for consumption.

Oh, my. that would be a serious flaw, if true. But if we turn to page 27, 29, 31 and 32 of our report, we read that it isn't. To wit, from page 32:

The data on trade flows in this report was gathered from the Interactive Tariff and Trade DataWeb of the USITC in March and September 2010. For analysis of exports, the report used data on “domestic exports,” which, according to the USITC, “represents goods that are grown, mined, produced, or manufactured in the United States and sent to foreign countries. Domestic exports include goods from U.S. Foreign Trade Zones that have been enhanced in value.” In this report, data on imports are “imports for consumption,” which “represents foreign goods that immediately enter U.S. consumption channels. Goods being held in bonded warehouses or U.S. Foreign Trade Zones are not included until they are withdrawn for consumption.” 

Domestic exports and imports for consumption are the best measures for determining the economic effects of trade flows. According to the USITC, which is responsible for producing independent studies on the effect of FTAs on the U.S. economy for Congress, “Analysis of international trade data, whether for tabular, econometric, or modeling purposes, almost always excludes transshipments [i.e. re-exports] and relies on data on domestic exports..." An economist at the USITC has further noted that, “For economic analyses, such as for understanding the position of a particular U.S. industry, or for labor or environmental questions, domestic exports and imports for consumption are more likely to be relevant concepts than total exports and general imports, because they are more closely tied to the U.S. market.”

Inside U.S. Trade also reports that Vargo doesn't like that we include China in our group of non-FTA partners, because the Chinese economy is growing so dang fast.

Vargo specifically cited the fact that the Public Citizen report does not take into consideration the fact that economic growth in China, a non-FTA partner, has been on average greater than growth in FTA partners like Canada. In this way, comparing growth rates among FTA and non-FTA partners may be misleading, as these differences could be due to factors unrelated to the FTAs themselves, he signaled.

In fact, our report does anticipate Vargo’s objection. In footnote ii on page 8, the report explains that we computed the results with China excluded to see if China alone was driving the exports to non-FTA partners. As it turns out, the FTA group STILL lags the non-FTA group, even when China is erased from the map. We decided to go yet another step further and exclude China, India, and Vietnam from the analysis, and, although the exercise is a bit ridiculous, the results indicate that the “FTA penalty” persists.

But Vargo's claim is interesting. Is he suggesting that abnormally bad things tend to happen to our trading partners when they sign an FTA, but abnormally good things happen to countries that don't sign FTAs? That would be the only explanation for why this type of variation would matter, when we're looking at differentials in export growth rates between trading partners across identical time horizons. All else equal, I would assume that, among 17 FTA partners and 180 non-FTA partners, there would be some good things happening in some of the countries, some bad things happening in some of the countries, but that the bad things wouldn't be concentrated disproportionately in one group or the other.

Sure, there's been some evidence that bad things have happened to countries mysteriously soon after they signed FTAs. (Lower growth, rural displacement, etc., see here, here, and here.) It's interesting to know that NAM thinks that there may be some concentration of such bad things in our FTA partners. Definitely worth further study.

But, at the very least, we seem to all be in agreement that "domestic exports minus imports for consumption" is a legitimate measure of the trade deficit. Now, we've still got to get to the bottom of why NAM pushes trade deals that are associated with lower-than-average export growth. 

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Lori Wallach on HuffPo: "Jobs & Exports: New Report Highlights Obama Peril with Bush Trade Pacts"

Check out Lori Wallach's latest piece on the Huffington Post:

"The growth rate of U.S. exports to the countries with whom we do NOT have Free Trade Agreements (FTAs) has been over double that to U.S. FTA partners. That stunning finding should put an end to recent Obama administration talk about reviving three NAFTA-style FTAs leftover from the Bush era. And, it should provide impetus to finally implement President Obama's campaign commitments to renegotiate aspects of the past FTAs, and create a new American trade pact model going forward.

The core justification for FTAs like NAFTA and CAFTA is that they boost exports. Yet Public Citizen's recent study "Lies, Damn Lies and Export Statistics," analyzes the actual government trade flow data. It showed that, if exports to the 17 U.S. FTA partners had only grown as much as exports to the rest of the world, the U.S. would have had an extra $72 billion in exports over the past decade..."

Read the entire piece at the Huffington Post.

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Chamber of Commerce critiques own method in trigger-happy response to Public Citizen

We fully expected a Chamber of Commerce response to our new report "Lies, Damn Lies and Export Statistics" ... I just didn't expect it to be in the form of an argument we already shredded in the report itself.

Does anyone read anything in this town?

For those just tuning in, our new report shows that the export growth rate to non-FTA countries is twice that to FTA countries. This should put a real damper on any calls for Obama to adopt Bush's FTAs as a way to boost exports. As David Dayen from Firedoglake put it,

I like this report because it challenges neoliberalism on its own terms. It puts aside for a moment the 5 million manufacturing jobs lost since NAFTA and its clones in 1994 (but only for a moment – this painful adjustment is reason enough to be skeptical of FTAs), and it puts the lie to the prevailing wisdom that this job loss is balanced by increased trade and “open markets” and economic growth, which lifts up the US economy in other sectors.

In the New York Times story on our report this morning, two Peterson Institute scholars (Robert Lawrence and Jeff Schott) respond to our report with a variety of non-sequiturs.

Lawrence cites a statistic on the export growth rate to Canada following the U.S.-Canada FTA, but fails to compare that with anything. As it turns out, sure, U.S. export to Canada grew in the first six years of the deal... but exports to non-FTA countries grew faster. Gotta have a control group, which is what our study is all about.

Schott says: "groups like Public Citizen were correct that there was not enough of a safety net for workers." Thanks for the kudos, but we're talking about exports, not safety nets.

Now, as the Chamber's John Murphy puts in their blog, and the Washington Post reports, they don't like that we exclude re-exports from our study. For the uninitiated, "re-exports" are goods that are not made by U.S. workers that are passing through U.S. ports. If you include these in your calculation (as unfortunately many superficial calculations by trade agencies do), you artificially inflate the export picture. For multinationals dedicated to overseas production and more and more FTAs, you can see how using this stat would have some appeal.

There's just one catch: our finding of an "FTA export penalty" doesn't go away if re-exports are included.

And there's just one other catch: the export data we use for calculating the trade deficit that the Chamber doesn't like is also the export data used in the Chamber's own study  (see page 7 - where it describes its GTAP trade flow database) - not to mention that the non-partisan, governmental U.S. International Trade Commission uses it for calculating the trade balance.*

I was actually giving kudos to the Chamber all day for this one correct point for being better than NAM, until I saw Murphy's post. For those with the patience, all of this is dealt with in careful detail in pages 30-32 of our report.**.

A little trigger happy on the blog post, guys?***

There are some more problems with the Chamber's post, revealed after the jump...

Continue reading "Chamber of Commerce critiques own method in trigger-happy response to Public Citizen" »

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On Eve of President’s Export Council Meeting, Report Shows U.S. Export Growth Lags With Free Trade Agreement Partners

Press Release: Sept 15, 2010    Contact: Bryan Buchanan (202) 454-5108

U.S. Exports Grew More With Non-FTA Countries; New Study Also Exposes Flaws in Methodology Used in Widely Cited Corporate Reports Touting FTA Benefits

WASHINGTON, D.C. – A new report from Public Citizen reveals that the growth of U.S. exports to nations with which the United States does not have Free Trade Agreements (FTA) has outpaced the growth of exports to the 17 U.S. FTA partners, with both services and goods FTA exports lagging. This comes as the corporate interests that dominate private sector representation on the President’s Export Council, which meets Thursday, have reframed their support for more NAFTA-style trade pacts as critical to promoting the president’s goal of doubling exports over the next five years to create two million new American jobs.

“There are many ways to boost U.S. exports and create American jobs, but the data show that more of the same trade deals is not one them,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

The report unpacks the irregular methodology used in National Association of Manufacturers (NAM) and U.S. Chamber of Commerce reports to show how results were produced that promote the passage of three leftover Bush FTAs. A consistent and corrected use of the corporate groups’ own methods show that past FTAs have been associated with a substantial “export penalty.” For instance, once an arithmetic error is corrected for, the Chamber’s own methods would project a $30 billion loss in U.S. exports to Korea, Panama and Colombia over five years were these FTAs implemented.

“We’re all entitled to our own opinions about NAFTA-style trade deals, but we’re not entitled to our own facts,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch and a report co-author. “U.S. government trade data shows that the export growth rate to non-FTA countries is double that to FTA partners, in contrast to corporate claims.”

Among the key findings of the report, “Lies, Damn Lies, and Export Statistics: How Corporate Lobbyists Distort the Record of Flawed Trade Deals” are:

·         Between 1998 and 2009, U.S. goods exports to FTA partner countries grew by an annual average rate of only 0.8 percent while goods exports to non-FTA partner countries grew by an average of 2.2 percent. If 2009 is excluded (to replicate a recent Chamber study that claimed that FTAs boost export growth), the average for FTA countries is 3.0 percent vs. 4.2 percent for non-FTA countries.

·         Defenders of the past U.S. FTAs regularly claim that these pacts’ existence helped avoid a worse falloff in trade related to the global economic crisis. In fact, in 2009, exports to FTA countries shrank 21.1 percent, while exports to non-FTA countries shrank 18.4 percent.

·         If the difference between the FTA and non-FTA export growth rates for goods for each year were to be put in dollar terms, the total FTA export “penalty” would be $72 billion.

·         The United States has suffered large and growing trade deficits with its major FTA partners and with the group of FTA nations as a whole trade.  Even as trade flows declined because of the economic crisis, as of 2009, the United States had a $54 billion trade deficit in goods, excluding oil, with its 17 FTA partners. The president cannot achieve net U.S. job creation through export growth by establishing more FTAs that increase imports more than exports. Trade officials have occasionally admitted the unfortunate deficit-boosting trend of U.S. FTAs: In an October 2006 speech to a Korean audience, Bush administration official Karan Bhatia said that it was a myth that “the U.S. will get the bulk of the benefits of the FTA. If history is any judge, it may well not turn out to be true that the U.S. will get the bulk of the benefits, if measured by increased exports.” He added that, in the instance of Mexico and other countries, “the history of our FTAs is that bilateral trade surpluses of our trading partners go up.”

·         Contrary to recent corporate claims, the trade balance in non-oil manufactured goods with U.S. FTA partners over 2008-2009 was a deficit of $97 billion. The NAM reported that “over the past two years FTAs have resulted in a U.S. manufactured goods surplus of nearly $50 billion.” To achieve this outcome, the NAM used “total export,” data, a measure including billions of “re-exports” of foreign products transshipped through U.S. ports but not made by U.S. workers. When the domestic export data employed by the U.S. International Trade Commission is used, the opposite result is produced.

·         The data show that the United States had an increased agricultural trade deficit with the bloc of 17 FTA partners, dispelling the frequent claims made by proponents that U.S. farmers have been the beneficiaries of NAFTA-style FTAs.

·         Since the U.S. began implementing NAFTA-style FTAs in 1994, the country has lost 4.9 million manufacturing jobs, as 43,000 American manufacturing facilities closed.

“There are real people behind these numbers,” said Travis McArthur, trade and finance researcher for Public Citizen’s Global Trade Watch and co-author of the report. “That’s why an honest, data-based discussion about the economic impact of FTAs based on the NAFTA model is critical, especially as the president considers how to meet his goal of doubling U.S. exports.”

The second section of the report thoroughly examines each of several recent reports and claims by the Chamber of Commerce and the National Association of Manufacturers and reveals irregularities that show the corporate lobby groups’ finding to be unreliable. For instance, Chamber reports claiming major export benefits from U.S. FTAs calculated FTA export growth using a non-weighted average of averages, which greatly overvalues large percentage gains of tiny trade flows, and then compared this to a weighted average of non-FTA countries’ export growth. It also used two different time period measures for FTA and non-FTA exports which further bias the outcomes.

President Barack Obama strongly criticized the NAFTA trade pact model and made commitments to trade policy reform during his presidential campaign. Despite this, some Obama administration officials have argued that implementing President George W. Bush’s FTAs with Korea, Colombia and Panama is the way to meet Obama’s export-boosting goals. The findings of this report show this view is not supported by the data on past FTAs’ performance.

“The administration should focus on implementing President Obama’s trade reform commitments,” said Tucker. “As this report shows, that approach would be more likely to produce export-expanding trade deals than would adopting the leftover Bush agreements as Obama’s own.”


Click here to view full report.

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Lula - US 'wets itself' on Brazil's WTO wins

In a recent Reuters article, "Brazilian mouse made U.S. elephant run on trade: Lula," Brazilian President Luiz Inacio Lula compared the recent Brazilian victories in trade disputes against the United States to a small mouse frightening an elephant.  President Lula explained how, in the past, Brazil has never dared to challenge U.S. trade policy but recent victories in trade disputes against the US has changed this.  Specifically, he likened it to "when you put a mouse near the elephant and see how the beast trembles and wets itself."

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No new jobs, just blackened lungs, in Uruguay v. Philip Morris dispute

One of the main claims made by proponents of the investment rules in FTAs or "bilateral investment treaties" (BITs) is that, in Scott Linicome's words...

the FTA investment provisions that they're carping about are actually designed to encourage mutual investment in FTA partner countries - i.e., to help the countries give each other money for silly things like factories and jobs - by providing certain basic protections for that investment.  

Notably, very few of the dispute cases I've read about involve new investment or new jobs. In some cases, as with the S.D. Myers case we discuss here, there simply is no major job creating investment at issue - maybe only a storefront office. In other cases, a foreign company has merely acquired a local company, so no new jobs are created.

In still other cases, a foreign investor had invested in a country long before the bilateral investment treaty 
was signed, but then subsequently utilizes the BIT to attack non-discriminatory regulations they don't like.

That's the case with the recent challenge by tobacco company Philip Morris under the Swiss-Uruguay BIT Picture1 against Uruguayan public health measures. Philip Morris, Inc. - a U.S. corporation at the time - bought up Abal, a Uruguayan tobacco company, during Uruguay's military dictatorship in 1979. In 1991, Switzerland and Uruguay inked a BIT. In 1999 and 2008, the ownership of Abal was shuffled around to Switzerland-based holding companies. In 2010, Philip Morris launched a case against Uruguay's public health measures, which went into effect in 2008 and 2009.

In other words, the implication of the BIT was not more jobs created in Uruguay, but a platform for a long existing entity to challenge Uruguay's efforts to reduce smoking deaths - and maybe, just maybe, put a chill on anti-tobacco legislation in other developing countries - now a primary market for Multinational Big Tobacco.

You can find Philip Morris' request for arbitration here, a legal analysis by investor-state expert Todd Weiler here, a piece by Juan Antonio Montecino and Rebecca Dreyfus here, and an earlier analysis by Luke Eric Peterson here.

Continue reading "No new jobs, just blackened lungs, in Uruguay v. Philip Morris dispute" »

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California says NO to more job-killing FTAs

As thousands of Californians struggle to find employment, state leaders are sending a message to Washington to hold off on more free trade agreements (FTAs) that fuel the "race to the bottom." Last week, the California legislature passed Assembly Joint Resolution 27 a vote of 48 to 27. The resolution urges the U.S. Congress to oppose the Colombia FTA.

Lead sponsor Asm. Torrico explains why it's important for the U.S. Congress to take a stand for fair trade:


Although it is unlikely that the Colombia FTA will be taken up by Congress imminently, the South Korea FTA - another Bush-negotiated trade pact - is making its way toward Congress quickly. State legislators in several states have been weighing in with the Obama administration on the South Korea FTA in recent weeks. They have been asking that he hold true to his campaign promises to change the failed trade model by fixing the Bush- Korea FTA. 

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Not enough canola to remove the bitter NAFTA taste

Seemingly from the annals of fake corporate names like Globochem and Brawndo, a company named Chemtura recently was ruled against in a NAFTA investor-state case brought against Canada.

Their claims? That Canada had failed to accord "fair and equitable treatment" to - and had indirectly expropriated - their investment. A panel convened under UNCITRAL sided against Chemtura.

But before we crack open the champagne...

  1. Chemtura's case was undermined by several revealing internal documents that may not be available in other cases, Part I. Chemtura (and its predecessor companies) are in the business of marketing pesticides to canola seed growers (among many other things). In the Canadian market, they had used lindane, a chemical thought to contribute to cancer and restricted in the U.S. and in many other countries around the world. Chemtura was also involved in marketing alternative chemicals to lindane in the U.S. market. In 1997, a Chemtura subsidiary got wind of lindane-treated canola seed coming into the U.S. from Canada, and contacted the U.S. EPA to put the smack down on the practice. The EPA did take some actions, which snowballed eventually into Canada reconsidering whether it shouldn't also ban or phase out lindane treatments, which in turn affected, you guessed it, Chemtura's Canadian lindane operations. It was difficult to challenge Canada's actions since they snowballed from a series of actions initiated by the company's own U.S. affiliate. (See page 28 of this.)
  2. Chemtura's case was undermined by several revealing internal documents that may not be available in other cases, Part II. In 1998, Chemtura had sent an internal communication that arguably revealed a kind of double speak: one the one hand, the company publicly agreed to voluntarily withdraw Lindane from the Canadian market. Privately, they were lobbying for expedited Canadian approval of a lindane alternative that they were using in the U.S.... perhaps as a quid pro quo. This internal communication weakened Chemtura's argument in the NAFTA case when the company tried to paint itself as a victim of regulators. (see page 53 of the decision - linked above and here.)
  3. Better to follow than to lead. I would also just note that Canada was, in this case, taking and facilitating a series of steps to move past lindane that a great many countries had already taken going back to 1968. Canada was a laggard in this regard, and it would have been difficult for the tribunal to side with an investor against a policy of such international pedigree. Countries that are innovators in the field of environmental protection would not have similar "cover."
  4. The tribunal embraced a troubling notion of customary international law. Historically, the notion of "customary international law" has been a pretty limited one, essentially designed to capture the standard behavior of governments. Under NAFTA and other pacts with investor-state dispute resolution, however, unelected tribunalists have expanded the notion of "customary international law" to include stuff that investor-state tribunalists (rather than governments themselves) say. While siding with Canada, the Chemtura tribunal embraced this troubling notion of customary international law (see page 31-32).
  5. Democracies get judged on how quickly they help out corporations relative to other democracies. While ultimately siding with Canada, the tribunal analyzed how quickly Canadian regulators approved company's pesticides relative to their U.S. counterparts to help determine whether Canada was violating Chemtura's NAFTA rights. (See page 67). While a minor part of the overall decision, this is a troubling precedent, and could incentivize corporations to launch investor-state cases when regulatory approvals occur less quickly than they would like.
  6. Many troubling aspects of NAFTA's expropriation doctrine affirmed. As my colleague Matt Porterfield has written, one of the most troubling aspects of NAFTA investor-state decisions is that, in variance with U.S. and most countries' domestic takings doctrine, NAFTA allows corporations to challenge as expropriations regulations that do not destroy/transfer nearly 100 percent of the value of an entire real property asset or interest. The Chemtura tribunal refused to endorse a break from past NAFTA tribunals, which have allowed an expansive definition of property interests, "conceptual severance" (i.e. a subpart of the property is treated as the whole for expropriation analysis), and less than 100 percent value diminution to constitute an expropriation. For instance, the Chemtura tribunal stated that "elements such as goodwill, customers or market share, or those covered under the more generic heading of the Claimant's "lindane business" in Canada, are part of the overall investment..." Such concepts would not typically be considered "property" under U.S. law for takings analysis. These "elements" could have been deemed to be expropriated, even if the rest of Chemtura's Canadian interests survived. And the fact that "net sales of lindane-based products represented approximately [only] 10 percent of" Chemtura's Canadian sales appeared to be the basis of the tribunal's conclusion that the government measure did not constitute a substantial enough deprivation to qualify as an expropriation... rather than how the matter would be analyzed under U.S. law, which has typically been to categorically reject any takings claim below the 95% destruction threshold. If lindane had constituted half of Chemtura's Canadian business, would the tribunal have made a different determination on this point? (pages 71-78)

The tribunal did make a very important statement, however:

"Irrespective of the existence of a contractual deprivation, the Tribunal consideres in any event that the measures challenged by the Claimant constituted a valid exercise of the Respondent's police powers. As discussed in detail in connection with Article 1105 of NAFTA, the PMRA took measures within its mandate, in a non-discriminatory manner, motivated by the increasing awareness of the dangers presented by lindane for human health and the environment. A measure adopted under such circumstances is a valid exercise of the State's police powers and, as a result, does not constitute an expropriation."

This a nice statement, although unfortunately it will not be a binding precedent on future investor-state tribunals, and Canada still had to shoulder half of its legal costs ($3 million Canadian). Policymakers should go a step further and state - in the trade pact text - that non-discriminatory policies that governments take for health and environmental protection cannot be interpreted as violating ANY trade pact terms.

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