WTO attacks U.S. ground beef labeling

For the second time in a week, reports have surfaced about the WTO clobbering a U.S. consumer labeling policy. Last week, the U.S. voluntary dolphin-safe tuna label was deemed a WTO violation. This week, Reuters is reporting that the WTO has ruled that U.S. beef labels are a WTO no-no.

Corporate meatpackers are rejoicing, saying (according to Reuters)... 

COOL was a bad idea from the start. "This ruling is unfortunate for the U.S. government but the consequences of a poor decision have been revealed. We fully support WTO's preliminary ruling," Bill Donald, president of the National Cattlemen's Beef Association, said in a statement.

WTO interference in these types of labeling schemes are likely to further erode support for so-called "trade" deals. As author Eric Schlosser wrote,

"The days when hamburger meat was ground in the back of a butcher shop, out of scraps from one or two sides of beef, are long gone. Like the multiple sex partners that helped spread the AIDS epidemic, the huge admixture of animals in most American ground beef plants has played a crucial role in spreading E. coli 0157:H7. A single fast food hamburger now contains meat from dozens or even hundreds of different cattle..."

Consumers, ranchers, farmers and legislators worked hard to pass the labeling rules after seeing ground beef horror stories in Schlosser's movie and book Fast Food Nation.

Heck, even free marketeers will be upset with the WTO ruling, since labeling transparency allows the consumer to make the free choice as to what kind of product they want to buy without the government dictating the outcome.

Unfortunately, rather than fixing the WTO mess we've got, the Obama administration is working to expand these types of consumer-harming rules through not one, not two, but three additional unfair trade agreements. Indeed, President Obama is pushing a package of three NAFTA-style deals with Korea, Colombia and Panama that replicate and expand on the WTO threats to food safety.

What's worse, they'll allow some food processors with a presence in the U.S. and these countries with new rights to DIRECTLY attack U.S. consumer safety rules. If the investors win, then U.S. taxpayers have to hand over cash compensation to these corporations. Over $350 million in compensation has already been paid out to corporations under these cases. This includes attacks on natural resource policies, environmental protection and health and safety measures, and more. In fact, of the $9.1 billion in pending claims, all relate to environmental, public health and transportation policy – not traditional trade issues.

At a time when food safety and worker safety budgets are being cut, expanding these flawed rules is unconscionable. If you think that Obama should be spending his energy fixing the flawed trade rules already on the books rather than expanding these rules to new countries, say aye here and take action.

How did we get to a place where the WTO was telling us what type of consumer labels we could use? We have more data on the case after the jump...

Trade Looms Large in NY Special Election

(Disclaimer: Public Citizen has no preference among candidates for office)

Yesterday Democrat Kathy Hochul pulled off an upset win against Republican Jane Corwin in the special election for New York's 26th District, wresting control of a seat the GOP has occupied since the 1960's. Much attention has focused on the candidates' positions on Medicare as a deciding factor in the race, but trade policy also played a key role in the election.

Jack Davis, independent candidate and president of a local manufacturing company, turned the spotlight on the devastating consequences of unfair trade policies for American manufacturing workers. His focus on offshoring garnered nine percent of the votes in the special election.

Earlier in the race, Davis was polling at 23 percent, a testament to the power of trade as an election issue.  Eager to be on the right side of the trade issue, Kathy Hochul released a strongly-worded statement condemning NAFTA and opposing the Korea, Panama, and Colombia FTAs.

For her part, Corwin ran an ad claiming that she would "oppose trade agreements that just aren’t fair", but never followed through in naming a specific pact that she would oppose. When asked point-blank in a questionnaire if she supported NAFTA and the Korea, Panama, and Colombia FTAs, she refused to take a position.  The tension between Corwin's vague fair trade statements and her reluctance to oppose specific policies came to a head when Hochul and Corwin addressed Davis' absence from the May 12th debate:

Oddly, Hochul and Corwin both ended up noting Davis’ absence from the debate not to needle him, but each other.

Hochul started it, saying she wished Davis had participated because “he brings a lot to the debate,” and on his behalf demanded Corwin state her view of the North American Free Trade Agreement and unfair trade. That’s been Davis’ signature issue in all four of his congressional campaigns.

Corwin’s answer: “Right back at’cha, Kathy. There are a lot of things that Jack could ask Kathy Hochul. I think we need to get clarification on her plan for Medicare. She talks about holding the line on taxes. How do you hold the line on taxes when you’re advocating ... to raise taxes?”

That exchange sharply contrasted the difference between Hochul's commitment to oppose specific trade agreements and Corwin's broad statements on fair trade. A large number of the new GOP House freshmen campaigned on supporting fair trade. With Hochul's solid win over Corwin, they're on notice that they will have to put their money where their mouths are on the upcoming votes on the Korea, Panama, and Colombia FTAs or face voter anger in November 2012.

Scott Walker's NAFTA trade package

President Obama came under fire from progressives earlier this year who felt he did not do enough to support the working families in Wisconsin and throughout the Midwest who have been fighting to preserve their collective bargaining rights from attacks by anti-worker governors like Scott Walker.

Now, the administration has gone a step further and is touting Scott Walker's support for a package of three NAFTA-style trade deals that are projected to offshore American jobs. The letter also calls for reinstatement of Fast Track, the undemocratic mechanism invented by Richard Nixon to ram trade deals through Congress that expired in 2007 and that Obama campaigned against as a candidate.

Most governors did not sign onto this latest NAFTA push. But  major anti-union Republican governors including Walker and Indiana's Mitch Daniels are on the letter. (See whether your governor signed on or not after the jump.)

It's one thing to backtrack on the fair-trade campaign commitments you made to your political base, adopt Bush's trade policies as your own, and refuse to go out of your way to fully support your political base in state level politics. It's quite another to actively partner with governors that want to destroy your political base on an agenda the American people despise.

Click here to take action and urge your member of Congress to vote down Scott Walker's NAFTA trade package.

See the full list of signatories after the jump.

U.S. dolphin-safe tuna labeling rule deemed a WTO violation

One of the environmental movement's greatest achievements has been the passage of legislation that protects dolphins from being slaughtered.

Now, U.S. dolphin protection rules have gotten slammed yet again by the WTO. GATT-zilla versus Flipper Take One Zillion: flipper goes down to defeat one more time.

We'll take you through some of the history of this battle. Worryingly, the WTO found that even purely voluntary labeling convention like the U.S. "do lphin safe" labels could be deemed mandatory (and thus give rise to a WTO violation) if they impeded non-labeled tuna's "marketing opportunities in the United States." In other words, even private consumer preferences for dolphin-safe tuna can lead to a WTO violation. This could cast a real chill on voluntary labeling practices, which a lot of supporters of free trade are in favor of.

Moreover, the Obama administration did not appear to even use all possible defenses to fight against this attack.

As Inside U.S. Trade reported today,

In a confidential interim report circulated to the United States and Mexico earlier this month, a World Trade Organization panel found that U.S. labeling requirements that preclude many Mexican tuna exports from receiving a "dolphin safe" label in the United States violate international trade rules, according to informed sources.

The interim panel report found that the U.S. requirements violate Article 2.2 of the WTO's Agreement on Technical Barriers to Trade (TBT). That article forbids WTO members from implementing "technical regulations" that are "more trade-restrictive than necessary to fulfill a legitimate objective."

The case is likely to go to the Appellate Body of the WTO. But, assuming the initial WTO panel was correctly applying the WTO's anti-environmental, pro-corporate trade rules, the U.S. will have to (again) water down its dolphin protection policies or face trade sanctions.

This case has a long and sordid history, as we documented all the way back in 2000:

Trade Deficit with FTA Countries Continues to Climb

Yesterday the Census Bureau released the March trade flow numbers, revealing that our trade deficit continues to worsen. The U.S. trade deficit rose by $2.8 billion, or 6.2 percent, between February and March on a seasonally-adjusted basis.

With Congress on the verge of considering another set of trade agreements based on the NAFTA model, digging into the data of this new release could help illustrate whether existing NAFTA-style trade agreements are aiding or hindering the fight to keep the trade deficit under control.

The most recent trade data shows that the deficit with our 17 FTA partners continues to worsen, adding to the body of evidence that NAFTA-style trade agreements are hurting American workers. Between February and March, the U.S. trade deficit with U.S. FTA partners grew by $1.6 billion, or 12.3 percent. News reports on the trade deficit noted that the dramatic rise in the price of oil in March accounted for much of the widening of the overall trade deficit. Do oil imports explain the rise in the trade deficit with our FTA partners? No, the jump in the trade deficit with U.S. FTA partners is still huge when you take out oil to account for the jump oil prices. With oil excluded, the trade deficit with FTA partners increased by $846.9 million, or 13.9 percent, between February and March. The non-oil trade deficit with countries that are not FTA partners grew by only 6.8 percent over February-March, less than half the pace of the growth in the deficit with FTA partners.

The latest trade numbers are a sign that the trade deficit is acting as a brake on the momentum of the economic recovery. Given that trade with our current FTA partners act as a primary force in that brake, it is time for the Obama administration to rethink the Korea, Panama, and Colombia FTAs and chart a path away from the old trade model that leads to skyrocketing deficits.

New memo on WTO conflict with measures to fight too big to fail banks

There are many ways that nations can check the growth of “too-big-to-fail” (TBTF) banks. One approach utilized in the past is adoption of firewalls between insurance firms, investment banks and commercial banks. This was used most famously in the United States through the Glass-Steagall Act from 1933 to 1999.

But various provisions of the World Trade Organization’s (WTO) General Agreement on Trade in Services (GATS) pose constraints on the type of size limitations a country may use. This is not surprising, since elimination of U.S. firewalls was a top priority for big banks in the original Uruguay Round GATS talks.

Moreover, Article 13.4 of the Korea-U.S. Free Trade Agreement (FTA) contains virtually identical anti-size-limiting rules,  as have many bilateral FTAs since the North American Free Trade Agreement (NAFTA).

We've just uploaded a new technical memorandum on this topic.

Section I outlines the basic policy options and debates confronting policymakers who wish to solve the TBTF problem.

Section II outlines the relevant GATS (and by implication, FTA) rules, and their possible conflict with these TBTF policy solutions – whether in the form of firewalls, licensing procedures or outright size limits. Section III concludes by suggesting a number of policy fixes.

Finally, Appendix I looks at the negotiating history of what relevant financial policies the United States bound to the GATS, including records released in response to Public Citizen’s requests under the Freedom of Information Act (FOIA). These documents show the disconnect between key U.S. negotiators and regulators during the Uruguay Round and subsequent financial services talks as to the reach of the core substantive obligations of the GATS. Appendix II details how the U.S. administered Glass-Steagall, which is useful for determining the exact intersection with GATS rules.

New Estimate of NAFTA Jobs Impact Warns Against Korea FTA

Rob Scott at the Economic Policy Institute has released a new study estimating 683,900 U.S. jobs have been displaced due to the rise in the trade deficit with Mexico after NAFTA was enacted. It serves as a grim warning of what could come if Congress were to approve the Korea FTA, which is based on the NAFTA model. Scott breaks down the job displacement by industry and congressional district, illustrating how workers across the country have been harmed as the deficit with Mexico skyrockets.

As Scott notes, corporate lobbyists and administration officials pushing the Korea FTA today sound just like pro-NAFTA government officials back in the early 1990's before NAFTA devastated U.S. manufacturing jobs. Once again they are claiming that a NAFTA-style trade agreement will create thousands of jobs, but this new study is a wakeup call to anyone who views their claims as believable.

Scott highlights the fact that the industrial structure of U.S. trade with Mexico and South Korea are very similar, which portends NAFTA-like job loss if the Korea FTA were to be implemented. The U.S. has huge trade deficits in electronics and motor vehicles and parts with both Mexico and South Korea, and the U.S. International Trade Commission predicts that the U.S. trade deficit in these products will dramatically increase if the Korea FTA were to enter into force.

Daniel Griswold over at the Cato Institute challenged the results of the study, claiming that the study's method of computing job losses is flawed. Proponents of unfair trade may rail against the methodology that Scott employs now, but what did they think of it when they were trying to prove that NAFTA would be a boon for workers before it passed? They embraced it. Gary Hufbauer and Jeffrey Schott, leading NAFTA proponents at the Institute for International Economics, released a study in 1993 predicting that the annual U.S. trade balance with Mexico would improve by $9 billion due to NAFTA, leading to a net increase of 171,000 U.S. jobs. To estimate the increase in the number of jobs, they used same method as Rob Scott used in his latest NAFTA study and applied it to their prediction of the change in trade flows after NAFTA, although their study did not break down jobs geographically.* Perhaps FTA proponents have changed their minds about the method merely because it now reveals all those claims about NAFTA job gains went up in smoke after NAFTA was actually enacted.

Griswold then goes on to belittle the magnitude of the job displacement estimated by the study, comparing it to the 15 million jobs that are created and destroyed annually. It's a silly comparison, because the 15 million figure deals with turnover, whereas Scott's study deals with the changes in the total number of jobs displaced by trade with Mexico at two different points in time, i.e. the net change after all the turnover has completed. 683,900 jobs is a lot of jobs, especially to those workers who have seen their jobs offshored due to unfair trade policy.

*The only significant difference between the studies is that Hufbauer and Schott used estimates from a 1992 Department of Commerce study of the number of jobs supported in each industry by each export commodity to Mexico, for which there is no similar recent data. Scott used data from the Bureau of Labor Statistics on the jobs supported by a given quantity of goods produced in the United States by industry, which gives results similar to the Department of Commerce data.

Postscript on PMD

Last week's post on the WTO's prudential measures defense (PMD) sparked some discussion over at the IELP blog. (Wow, three acronyms in an opening sentence. Awesome!) It's a pretty wonkish issue, but/and I thought I'd follow up with a few additional observations.

On last week's post, I noted that there's four interpretations of the PMD: 1) it's totally self-cancelling: no prudential measures are allowed. 2) it disciplines nothing: any prudential measure is allowed. 3) that the PMD is an "exception" analagous to GATS Article XIV. 4) that the PMD is self-cancelling in the sense that the second sentence makes clear that GATS Article XVI on market access is a floor of treatment. Countries with relevant commitments at the WTO can't go below that that floor for prudential reasons, but they are given some additional flexibility vis a vis other GATS commitments.

While the debate over IELP focused on how these interpretations are different, it's worth noting what they have in common: a measure would have to be deemed "prudential" (and affect trade in financial services) to be covered. Presumably, there's a wide range of potential policies that would not be deemed prudential. (A set of recent papers from the IMF (see here and here) suggests typologies and interrelationships between measures that are about capital flow management or currency, or prudential or non-prudential. Some of the distinctions are very finely drawn, and I'm not sure at the end of the day that the distinctions have that much coherence. Not to mention that they wouldn't be binding on a WTO panel.) Casually speaking, I see "prudential" policies about keeping banks from hurting themselves (including in ways that have systemic residual effects), whereas "non-prudential" (but very important!) policies are about keeping banks from hurting the rest of us.

That's what the interpretations have in common. In essence, the PMD's first sentence represents a hurdle that policymakers have to meet: a policy has to be "prudential" for it to be covered by the PMD. (Arguably, policies that cap bank size or ban financial services or tax rapid capital outflows are about keeping banks from hurting us, not about keeping banks from hurting themselves. Thus, they may not be prudential.)

What sets Intepretation 4 apart is that it gives weight to the PMD's second sentence, and in particular its implications for GATS Article XVI that come from the applicable "exception."

April 2011 Executive Order on North Korea: Another Missed Opportunity to Address Conflict between Korea FTA and U.S. Sanctions Program

Obama's executive order “Prohibiting Certain Transactions with Respect to North Korea” (4/11/11) does nothing to remedy the conflict between the current U.S. sanctions on North Korea and the terms of the U.S.-South Korea Free Trade Agreement. "South Korean" goods with parts made in North Korea's Kaesong sweatshop zone would still be able to enter the U.S. duty-free.

Read our full memo to find out why.