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Breaking: GOP Boycotts Mark-Up of NAFTA Deals

At 3 pm today, the Senate Finance Committee was supposed to hold an "un-mark-up" of the implementing legislation for the three NAFTA-style deals.(For the background on this arcane Fast Track procedure, see our book here.)

But all the Republicans on the Committee boycotted the hearing, so Chairman Max Baucus (D-Montana) called it off.

They objected to the inclusion of any trade adjustment assistance (TAA) in the Korea FTA, on fiscal austerity grounds. Or, as Sen. Orrin Hatch (R-Utah),

"Unions and other anti-trade zealots gleefully use TAA data to make the case that trade causes outsourcing and job loss... Instead of helping build the case for trade, TAA certifications are used to show that trade is bad.  In the end TAA really is just a government subsidy for anti-trade propaganda."

Yes, reality is so uncooperative with corporate spin sometimes!

Not that the administration's stance is much more coherent. As our own Lori Wallach told Politico,

“For most Americans, what’s newsworthy is not that the administration is pushing Trade Adjustment Assistance (TAA), which effectively is a job burial insurance program, but that pushing a deal on TAA is being used as political cover to move more NAFTA-style trade agreements that will kill more American jobs in the first place, especially given our high unemployment rates.” Wallach added. “The point that’s gotten lost in all this wrangling over TAA is that the three leftover Bush trade deals are bad in and of themselves.”

It's unclear what comes next. Senators had lined up a raft of amendments to the FTAs, on everything from restricting abortion rights to restroring the TAA health care credit funding that the Obama administration had agreed to reduce from current levels. There's still time to shelve the deals, reverse course, and actually have Obama make good on his commitments to truly overhaul our failed trade policy. We'll be watching, and out in the streets over this Fourth of July weekend around the country.

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Obama Edges Closer to Political Cliff With Deal to Combine Program to Aid Workers Losing Jobs to Trade With Three Bush-Era NAFTA-Style Trade Pacts Projected to Cause More Job Loss

Statement of Lori Wallach, Director of Public Citizen’s Global Trade Watch

Given that polls show most Americans oppose more NAFTA-style trade pacts because they are job-killers, announcing that three more such agreements are ready to move only because a program to assist workers losing jobs to bad trade deals also can be extended will probably not surprise many Americans, but it sure will make them mad.

For most Americans, what’s newsworthy is not that the administration is pushing Trade Adjustment Assistance (TAA), which effectively is a job burial insurance program, but that pushing a deal on TAA is being used as political cover to move more NAFTA-style trade agreements that will kill more American jobs in the first place, especially given our high unemployment rates.

Poll after poll shows that the vast majority of the American public – across stunningly diverse demographics – is opposed to NAFTA-style trade deals and that members of Congress vote for them at their peril. Earlier this month, White House Chief of Staff Bill Daley, whose job is to sell these trade deals and who helped former President Bill Clinton sell NAFTA to a skeptical Congress, recognized that workers “lose from these agreements” and implied that campaigning against FTAs could even be an electoral advantage. (The Washington Post, “White House’s Daley seeks balance in outreach meeting with manufacturers,” June 16, 2011.)

The point that’s gotten lost in all this wrangling over TAA is that the three leftover Bush trade deals are bad in and of themselves. Even an official government study finds that the Korea deal will increase our trade deficit, and we know up front that it will kill jobs and undermine our national security. The Colombia deal will eliminate any leverage the U.S. has to combat the forced displacements and murders of unionists, Afro-Colombians, human rights defenders and others – problems that have gotten worse since this deal was signed in 2007. The Panama deal will make it harder for the U.S. government to penalize tax-dodging multinational corporations. The supplemental deal on autos for Korea, the labor “Action Plan” for Colombia, and the tax information exchange agreement for Panama are all toothless and do nothing to alleviate the aforementioned problems, as Public Citizen has extensively documented. They were all part of a political-cover kabuki dance.

Moreover, the fact remains that all three deals have the same damaging provisions we all remember from NAFTA: limits on financial services regulation, foreign investor privileges that promote offshoring, weak labor standards, limits on imported food safety and inspection, and the ridiculous private investor-state enforcement system that empowers multinational corporations to go around our domestic courts and directly challenge our state and federal laws before foreign tribunals and demand compensation from our tax dollars for claimed violations of the trade deal.

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Bulldozing Democracy One FTA at a Time

The vicious murder of university student and environmental activist Juan Francisco Duran Ayala earlier this month has stunned community members in the Cabanas region of El Salvador and beyond. Ayala is the fourth anti-mining activist from the Cabanas region to be killed in the past two years as growing community opposition to gold mining projects has been met with violence. Community groups, international NGOs and political leaders are calling for a thorough investigation into the material and intellectual authors of these murders.

This recent tragedy has brought renewed attention to the local conflicts erupting throughout Latin Mining America - from Peru to Mexico - regarding oil, mineral and gas extraction projects and their effects on the local environment.

And in recent years, many of these companies have gained new powerful foreign investor rights via so-called "free trade agreements" (FTAs) and bilateral investment treaties (BITs) that allow them to legally bulldoze through local community opposition and even to shape environmental policies in order to make sure their projects move forward. There are approximately 32 such investor cases launched by extractive industry
companies pending before the International Centre for Settlment of Disputes (ICSID) for hundreds of millions of dollars.

Over the weekend, the New York Times published a top story on this exploitation as it unfolds in El Salvador. As local and nation-wide opposition to precious-metals mining began to gain momentum in 2009, Canadian mining company  Pacific Rim Mining Corp. launched a case against El Salvador under the Central American Free Trade Agreement through a U.S. subsidiary.

The company is using CAFTA to challenge El Salvador's environmental policies and is seeking over $100 million in damages for allegedly not being given the green light to begin operating its "El Dorado" mine in the Cabanas region (the Salvadoran government argues the company did not complete the permitting process). The case is currently being heard before a World Bank tribunal in Washington, DC.

Although investment cases like these represent one of the most alarming institutional shifts in power between the public and corporations in decades (if not generations), the NYT, to our knowledge, has only written a total of three articles that explore the issue in any depth (including the one referenced above and here and here).

Hopefully in the weeks leading up to Congressional votes on new FTAs which will empower thousands of  companies with rights to seek compensation for state and federal policies in the U.S., Korea, Colombia and Panama, the NYT and other media outlets will delve more deeply into how these investor rights are already playing out in communities across the Americas.

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Corporations push for WTO attack on green jobs

The Obama adminsitration is deliberating whether to get involved in a WTO attack on Canada's green jobs program, according to today's Inside U.S. Trade.

Last September, Japan announced that it would be challenging the Canadian province of Ontario's renewable energy program. As IUT reports:

The Ontario program, known as a "feed-in tariff" (FIT), enables producers of wind and solar energy to sell that electricity into the Ontario grid at a higher rate than what the government regulator offers for conventional energy. That higher rate can be up to six times greater than the rate for conventional energy, sources said.

However, producers can only qualify for the program if they use specific amount of Ontario goods Green-jobs-1 and services in establishing that renewable capacity. The domestic content requirement for projects that entered commercial operation in 2010 was 50 percent, and that increased to 60 percent in 2011, sources said.

The U.S. solar industry source contrasted this with "buy local" elements in the U.S. state and local green energy initiatives, which include a FIT program in Washington state and other renewable energy incentive programs in Massachusetts and Michigan.

Unlike the Ontario measure, these programs do not condition participation in the program on the use of domestic content. Instead, these U.S. programs allow both domestic and foreign producers to participate, but offer a small bonus for firms that use domestic content, the source said.

The source argued that this added bonus is not significant enough to affect the competitiveness of firms that do not source locally. The Ontario program, by contrast, completely excludes companies that do not produce a significant part of their product in the province, this source said.

While highlighting the differences between the U.S. and Canadian programs, this source made it clear that the U.S. solar industry opposes any type of local content requirement, and supports an initiative proposed among Asia-Pacific Economic Cooperation countries to phase out such requirements in the green energy sector.

This source acknowledged that U.S. state and local programs that provide a bonus for firms that source locally may also violate WTO rules, but suggested that these programs are not commercially significant.

In other words, Buy Local programs are fine, so long as they're not effective. Once green jobs policies start actually accomplish their goal of incentivizing local production (i.e. meaning something), that's when we launch a WTO attack.

As the sources cited by IUT note, multinational corporations aren't so much worried about the economic impact of a single green jobs program in a single Canadian province.

Instead, they appear to be worried that the program will set an example that will inspire other nations, states and localities to take comparable action. In other words, Ontario's FIT could have a positive demonstration effect by showing people that you can work together to democratically determine alternatives to the decimation of manufacturing jobs and our climate.

Under WTO rules, third countries can join a WTO attack initiated by another country. The good news (or what passes for good political news in the current climate) is that Obama's trade officials worry that, if they join the attack, it could boomerang and affect U.S. green jobs programs.

The bad news is that they are even having this discussion. Why take the side of solar panel companies that are apparently worried that they don't support enough local jobs to qualify? At a time when long distance shipping is contributing massively to global warming, it seems irresponsible not to look for ways to incentivize firms to produce, and purchase, locally.

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FTA Stalled in Korean Legislature Amid Financial Deregulation Concerns

Song Min-soon As the fight against the Korea, Colombia, and Panama FTAs heats up with the AFL-CIO and the Chamber of Commerce launching dueling media campaigns, the Korea FTA fight on the other side of the Pacific continues to simmer.

The Korean National Assembly has not yet ratified the Korea FTA, and both the U.S. and Korea must approve the pact for it to go into effect. Although the pro-FTA Grand National Party currently has a majority in the Korean National Assembly, lawmakers are reluctant to bring such a controversial issue to a vote before their national elections in April for fear of provoking voters' ire. A pro-FTA legislator acknowledged that "It could already be too late" for the vote to occur before April. If they wait until after April to hold a vote, they may never get a chance, at least with the FTA in its current form, as the main Korean opposition party, the Democratic Party, opposes the FTA and could retake the majority in the National Assembly.

In an interview with the Wall Street Journal, senior Democratic Party lawmaker Song Min-soon discussed his party's opposition to the FTA. He zeroed in on the need to eliminate the strict provisions of the FTA that prohibit Korea (and the United States) from implementing a range of prudential financial services regulations, including capital controls:

[Mr. Song] says that South Korea should try to change the financial services portion of the pact to ensure that, should another financial crisis spur an outflow of capital as happened in 2008, Seoul has a full arsenal of measures to counter-act the effects.

As it stands now, Mr. Song says, the FTA may put some practical limits on measures South Korea may want to use to prevent an outflow of capital and a related weakening of the Korean won. To be sure, he says, it’s a fine line because the FTA does not “theoretically” stop South Korea from doing what it needs to do to protect the won. “But practically, it’s almost prevented,” he says.

Mr. Song has good reason to be worried about the Korea FTA tying his government's hand when it comes to regulating the flow of capital into and out of the country. He lived through the 1997 Asian financial crisis, which was precipitated by the uncontrolled flow of "hot money" into and out of national economies. Indeed, Asian countries that chose to implement capital controls faired better in the crisis than countries that stuck to complete financial liberalization. The threat to the stability of both the U.S. and Korean economies is yet one reason why Congress should reject the Korea FTA if and when the Obama administration submits it for approval.

For a detailed discussion of how the Korea FTA bans many types of financial sector regulations, check out our talking points on the subject.

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Comparing apples to bloody oranges

Corporate interests have been going into overdrive pushing the flawed NAFTA-style deals with Colombia, Panama and Korea. As we've documented before, a lot of the statistics that they bandy about as support for their position are misleading, incomplete, or makes apples-to-oranges comparisons.

It's one thing when these statistics have to do with economic accounting abstractions like export values: the argument could be wrong, but it doesn't hit you on an emotional level.

Not so with the latest deeply offensive talking point from the Heritage Foundation and the Cato Institute, now being cited by Gary Shapiro of the Consumer Electronics Association, who writes:

The battle over free trade has taken a crass -- and dishonest -- turn thanks to an ad campaign run by the AFL-CIO which suggests a free trade agreement between the United States and Colombia is "about murder" of Colombian labor organizers. The ad, which features a coffin, applauds the "brave union leaders" of Colombia who are lobbying Congress to reject the proposed agreement. The AFL-CIO claims that to approve the FTA would be to condone the murders of union leaders in Colombia.

What's the ads don't mention is that the Colombian union leaders visiting Washington this week are in more danger here than in their home country. In fact, according to statistics cited by the Heritage Foundation, the murder rate in Washington is 33.4 per 100,000 inhabitants, compared to the 5.3 for Colombian unionists.

I can't remember the last time I read anything so callous or tone deaf. The reason that labor, faith and human rights groups have highlighted the Colombian unionist assasination numbers is because many if not all of these murders in Colombia occur because of the unionists' activities.

The D.C. murder rate is heartbreaking. But how many of these murders occur because someone is attempting to exercise their union rights? Zero. That's the relevant comparison.

Murder rates in D.C. - as across most of the U.S. - are driven largely by economic factors and include the failed war on drugs (and the competition between private individuals over drug turf.)

Unionist murders in Colombia are, by contrast, political, and are often carried out with state complicity.

Two closing thoughts.

First, the plan that the Obama administration is pushing does not require an end to these murders before the pact go into place. That is a tragedy and missed opportunity.

Second, much as employment and competition in the illegal drug sector drive DC's murder rate, the Colombian government's own studies predict an exacerbation of such problems in Colombia if the FTA is implemented. Given the rural displacement and further impoverishment the Colombia FTA is projected to cause, the Colombian Ministry of Agriculture concluded that the FTA would give small farmers little choice but “migration to the cities or other countries (especially the United States), working in drug cultivation zones, or affiliating with illegal armed groups.”

In sum, while the Colombia FTA does not require Colombia's unionist murder rate to come down to the zero rate of Washington, D.C., it may in fact drive Colombia's overall (non-unionist) murder rate up to Washington, D.C. levels.

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The Korea Trade Deal Horror Show


Watch and share this original Global Trade Watch production about the Korea trade deal. To take action, visit: http://bit.ly/meCLGp.


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Chamber of Commerce's Misleading Data Website Gives Only Half the Story

Today the Chamber of Commerce launched a website that purports to show the effects of U.S. trade upon jobs in each congressional district, as part of its lobbying campaign to pass the Korea, Colombia, and Panama Free Trade Agreements (FTAs).  Even a cursory review shows that the data included to represent “effects of trade” is only gross exports – imports are excluded, as are net figures that show the actual impact of trade on the districts. 

Indeed, the Chamber’s “new” website just repackages the previously-released old exports-only data featured in past Chamber “studies” of the FTAs. It’s the same misleading approach - like only counting deposits into ones bank account, not also withdrawals or the ending balance.

And, this is especially deceptive because it operates to cover up the huge U.S. trade deficit, which has been driven to astronomical levels by the very same NAFTA-style trade pacts supported by the Chamber of Commerce and the American jobs lost from years of large annual trade deficits.

When economists study the jobs impact of  trade pacts, they consider both sides of the ledger by estimating the number of jobs supported by exports as well as the number of jobs displaced by imports. As Nobelist Paul Krugman noted: " If you want a trade policy that helps employment, it has to be a policy that induces other countries to run bigger deficits or smaller surpluses. A countervailing duty on Chinese exports would be job-creating; a deal with South Korea, not…"

Studies that review both imports and exports explain why broad majorities of Americans are against the types of trade pacts the Chamber continues to promote. For instance, the Economic Policy Institute found that 5.6 million more jobs were displaced by imports than were supported by exports in 2007. Looking into the future, the Economic Policy Institute has estimated that implementation of the Korea and Colombia FTAs alone will lead to a net loss of 214,000 U.S. jobs due to rising trade deficits.

Exports support jobs, but the NAFTA-style trade pacts touted by the Chamber will lead to greater imports than exports, displacing workers in the United States. Says who? Well, among others, the Korea FTA’s lead negotiator Ambassador Karan Bhatia who was Pesident George W. Bush’s deputy U.S. trade representative. In an October 2006 speech to a Korean audience, Bhatia said that it was a “myth” that “the U.S. will get the bulk of the benefits of the FTA.” He went on to say, “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,” meaning that the U.S. trade deficit with those countries increased. 

Even on its own terms, the Chamber website’s estimates of the number of jobs supported by exports in each congressional district are often double counted and misleading. According to the website’s own methodological summary, if any part of a county intersects with a congressional district, all of that county's exports and extrapolated “jobs-supported” are added to that  district's total. This leads to a huge degree of double-counting, since exports from a single county are often assigned to multiple congressional districts. In Texas alone, the sum of the number of jobs supported by exports in each congressional district is 250 percent greater than the state total given by the Chamber, meaning that the jobs estimate for the average Texas congressional district is inflated by 250 percent. Thus, users of the website are misled when they think they are accessing the number of jobs supported by exports in their congressional districts.

Public Citizen has estimated the number of jobs in each congressional district in sectors that will be hit particularly hard by the Korea FTA. A searchable database of these estimates is available at:

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FTA Investors Rules Not Fixed by Preamble Change from 2007

As EOT regulars know, NAFTA-style trade deals contain investment rules that allow corporations to bypass national legal systems and launch attacks on governments in international tribunals. The basis for these attacks can be as simple as institution of a new environmental policy that affects the corporation’s expected future profits. Judges for these so-called “investor-state” cases are selected in part by the corporation, and the trade-pact rules are tailored to corporate demands. Often the mere threat of one of these investor-state awards can cast a chill on public-interest regulation.  All told, more than $350 million has been paid to date in these cases.  Moreover, there are over $9.1 billion in claims in the 13 investor-state cases outstanding under NAFTA-style deals, relating to environmental, public health, and transportation policy.  An additional $483 million has been awarded under U.S. Bilateral Investment Treaties (BITs), which contain similar investment rules. Billions of dollars are also pending in BIT cases now underway.

The Panama, Colombia and Korea “free trade agreements” (FTA) may be considered by Congress in the near future. These pacts constain investment rules that are almost identical to those in NAFTA, except where they are worse. There was one investment-related addition made to the preambles of these FTAs as part of a May 10, 2007 deal with the Bush administration. It stated that the parties: “AGREE that foreign investors are not hereby accorded greater substantive rights with respect to investment protections than domestic investors under domestic law where, as in the United States, protections of investor rights under domestic law equal or exceed those set forth in this Agreement.…”

Some have suggested that this provision goes all or most of the way towards resolving the concerns with these provisions. This is not the case. There is no certainty as to the legal meaning of the May 2007 preambular provision.

Public Citizen has just published a memo that examines six different approaches to preambular language, including the four that have been taken by the tribunals under the 45 final awards issued under U.S. FTAs and BITs.

The memo finds the May 2007 preambular modification fails to address the main concerns raised by scholars and members of Congress with regard to the investment provisions. Indeed, there is scant historical support for the notion that pro-public interest provisions of preambles are protective of regulatory prerogatives: nearly 90 percent of the time, tribunals have given them no weight at all. The remainder of the time,tribunals found that pro-public interest provisions had to be balanced against, and possibly watered down by, pro-investor provisions.

Deeper changes will be required to the investment provisions of the proposed FTAs with Korea, Panama and Colombia, as well as a Trans-Pacific FTA (which includes Peru, the U.S. and eight other countries) now under negotiation. 

To read the memo, go here.

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Obama Administration’s Dr. Jekyll Jobs and Mr. Hyde Trade Policy Schizophrenia

Statement of Lori Wallach, Director of Public Citizen’s Global Trade Watch

Whether schizophrenic or cynical, the reality is that we have the Dr. Jekyll administration saying that we need to boost manufacturing jobs while the Mr. Hyde administration is about to submit to Congress the U.S-Korea Free Trade Agreement, which  government studies show will slam seven key U.S. manufacturing sectors. (See chart below for the U.S. International Trade Commission’s [USITC] projections of losing U.S. manufacturing sectors if the Korea trade deal were to go into effect, available on Table 2.3 of the study.)

USITC Estimates of U.S. Industrial Sectors That Would Face Declining Trade Balances if the Korea FTA Is Implemented


Change in U.S. global trade balance (millions of dollars)




Motor vehicles and parts



Other transportation equipment



Electronic equipment



Metal products









Iron-containing metals



The U.S. government’s own study of the Korea trade pact projects an overall increase in the U.S. trade deficit and identifies seven major industrial sectors that will be hardest hit if the deal, which was signed by former President George W. Bush and is based on the North American Free Trade Agreement (NAFTA), is implemented. This includes the “jobs of the future” in manufacturing related to solar, high speed trains, computers and more.

Today, the President’s Council on Jobs and Competitiveness called for rebuilding American manufacturing while President Barack Obama visited a high-tech manufacturer, even as the Obama administration is expected to submit a trade deal to Congress that we know will hurt our manufacturing sector. That is worse than ironic; it is destructive.



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FDA Foreign Food Inspections Under Threat

FDA inspector We have yet more bad news on the food safety front. Two weeks ago, news came that U.S. consumers would be barred from knowing if the tuna they're eating was caught using methods potentially fatal to dolphins. Last week we found out that the WTO would prevent country-of-origin labeling on beef from foreign countries sold in the U.S. Now comes word that the meager FDA inspections of foreign food facilities that have given U.S. consumers a modicum of protection against dangerous food will likely be rolled back.

Inside U.S. Trade reports today that proposed cuts to the FDA's 2012 budget could cripple the FDA's ability to conduct food safety inspections at foreign facilities that export food to the United States, according to a leaked FDA document.

FDA inspections of foreign facilities were set to be strengthened in the coming years. The Food Safety Modernization Act, enacted in January, requires the FDA to double the number of inspections of foreign facilities every year over 2012-2016 to protect U.S. consumers from contaminated foods.

The new proposal, contained in a bill approved by the House Appropriations Committee, would fund the FDA's food programs in 2012 at only 90 percent of their 2011 levels, and at only 79 percent of the level requested by the Obama administration to ensure full implementation of foreign food facilities inspections. The FDA is supposed to conduct at least 600 inspections of foreign facilities in 2011, but it will likely have to conduct much fewer next year if the proposed cuts become a reality.

This week, Food and Water Watch released a report examining the threat that uninspected Chinese food imports pose to U.S. consumers' safety. Since China entered the WTO in 2001, the volume of imports of Chinese food into the United States by tonnage has increased by almost 200%, and the share of Chinese imports as a proportion of food consumed in the U.S. has skyrocketed for some key products, reaching 70 percent for apple juice, 43 percent for processed mushrooms, and 78 percent of tilapia. During the same period, several food safety scandals erupted in China, sickening hundreds of thousands of people there and killing thousands of pets in the United States. Nevertheless, between June 2009 and June 2010 the FDA conducted only 13 food inspections in China.

The bill slashing the FDA’s foreign inspections budget is expected to be voted on in the House next week. Given the repeated food safety incidents in China and now news of the tragic deaths in the E. coli contamination case in Germany, the need to fully fund increased food inspections at foreign facilities has never been clearer.

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As Obama Administration Pushes for Colombia FTA, Human Rights Abuses Persist

As Obama Administration carries on with it push for the Colombia FTA, a deteriorating human rights condition in Colombia persists. News continues to come in about the murders of Colombian activists, unionists, and teachers, including the recent death of a lands rights leader.  And now, reports are surfacing of forced displacement in Afro-Colombia and indigenous communities. According to the United Nations Office of Coordination of Humanitarian Affairs, more than 18,000 people were the victims of an armed strike by FARC guerrillas in May 2011.  Of these 18,000 it is estimated 16,000 are Afro-descendents and 2,000 are indigenous.   In a recent post, The Afo-Colombian Solidarity Network argues that, “When leaders are threatened and killed, movements can be silenced. In Colombia, if these movements cannot exercise their constitutional rights more displacement and violence is inevitable and these communities could vanish.”

 The severity and persistence of these abuses are alarming, particularly in light of the Obama Administration’s plan to go forward with a NAFTA-style Colombia FTA without addressing the perilous human rights situation in Colombia.

We’ve previously brought attention to Obama’s woefully inadequate Action Plan on the Colombia FTA, which does not require murders or displacement to stop. A memo to the President by House Democrats outlined how to address these concerns, but it has apparently fallen to death ears at the White House.

It appears the pressures is growing for the public to take action and draw attention to the present atrocities as well as the future steps needed to ensure human rights are respected in any free trade agreement with Colombia.

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Lori Wallach Profiled in The Hill

Check out this profile of Lori Wallach in The Hill today:

The Hill masthead

Agitator by Trade Unhappy with Obama

Wallach Lori"Wallach, who was a year ahead of Obama at Harvard Law School, says the administration took up the mantle of George W. Bush by making only negligible changes to the trade deals that were hammered out while he was in office. 'He’s reviving Bush-era agreements and making those his own. It’s inexplicable,” Wallach said. … Win or lose, Wallach says she doesn’t subscribe to inertia, aiming to out-research, outsmart, outwork and out-organize her opponents — the majority of which are corporations. 'There’s a powerful set of special interests on the other side,' she said. 'The public is with us and our case is strong.'”

Read the entire profile here.

Photo Credit: Greg Nash / The Hill Newspaper

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Gordon Lafer in The Hill: Choose Voters over Donors on Free Trade

Check out Gordon Lafer's op-ed in The Hill about the Colombia trade deal:

The Hill masthead 
Choose Voters over Donors on Free Trade

"As a political scientist, I’m sometimes asked how it’s possible for a democracy to enact laws that are opposed by the majority of voters. There is no clearer illustration of how this works than the current race to enact a free trade agreement with Colombia. The majority of Americans opposes NAFTA-style treaties. It’s not just union members; only 27 percent of Republicans think 'free trade' helps us. ... To see the Obama administration and Republican leadership quietly collaborating to seal this deal in knowing violation of the voters’ will is among the most telling signs of corporate power in Washington, and among the most depressing stories in these tough times."

Read the entire piece here.

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New Wall Street loophole opens U.S. up to WTO attack

The New York Times' Louise Story reported this morning that the pace of Wall Street reform has slowed to a crawl:

The rules are mandated by the Dodd-Frank financial regulatory law and range from curbs on executive compensation to consumer banking protection provisions to more transparency in the trading of derivatives, those complex financial instruments that contributed to the 2008 financial crisis.

So far, 28 of the financial overhaul rule-making deadlines have been missed, according to Davis Polk, a law firm that is tracking the rules. Of the 385 new rules to be written, the law firm says, regulators have completed only 24 requirements; they were supposed to have taken 41 such actions by now.

“There’s an attempt to kill this through delay,” said Michael Greenberger, a law professor at the University of Maryland and a former official at the Commodity Futures Trading Commission, which is in charge of writing batches of the rules.

But that's not the full story. Some derivatives rules are moving forward. They just happen to be rules that create new loopholes, as the NYT editorial page wrote last month in an editorial entitled "Mr. Geithner's loophole":

Until recently, the big threats to the Dodd-Frank financial reform law came from Republican lawmakers, who have vowed to derail it, and from banks and their lobbyists, who are determined to retain the status quo that enriched them so well in the years before, and since, the financial crisis. Now, the Obama Treasury Department has joined their ranks.

In an announcement on Friday afternoon — the time slot favored by officials eager to avoid scrutiny — the Treasury Department said it intends to exempt certain foreign exchange derivatives from key new regulations under the Dodd-Frank law. These derivatives represent a $4 trillion-a-day market, one that is very lucrative for the big banks that trade them.

There are numerous reasons to oppose the exemption of so-called foreign exchange (FX) swaps and forwards from the Dodd-Frank rules, as is ably argued by players and followers of the market themselves (see commentary from Zero Hedge, Quantitative Investment Management, Council of Institutional Investors, Stanford Professor Darrell Duffie, and the World Federation of Exchanges). The Wall Street banks that are among the huge players in this market want to preserve their elite club, even though Main Street sees little to no benefit from the trillions of dollars sloshing around the FX markets every day, much of it in speculative bets on interest rate and exchange rate movements around the world).

But there's an additional reason to oppose the swiss-cheese-ification of Dodd-Frank. The World Trade Organization's (WTO) services agreement groups FX swaps and non-FX derivatives in the same category, and subject them to similar de-regulation promoting rules. (The only exemption that the Clinton adminstration took in this sector is for ONIONS futures. You cannot make this stuff up.) These stability weakening WTO rules are strongly enforceable, unlike the stability-promoting global financial rules that others in the U.S. government are advocating.

As we noted in comments to the Treasury Department yesterday, WTO members are already suggesting that Dodd-Frank derivatives regulation may not be compatible with the WTO financial services commitments assumed by the Clinton administration during the 1990s.

The U.S. would have few strong defenses if Dodd-Frank were attacked at the WTO (or worse, by a private investor under one of our bilateral NAFTA-style deals).But the U.S. would likely cripple one of the few defenses it had if it argued that Wall Street self-regulation was merited for certain classes of financial exotica, but not for others. How then would the U.S. defend the "necessity" (a key test in trade law) of strong regulation for the non-exempted derivatives? Either government regulation is necessary across the board within the securities trading sector, or not at all. The time for carving out FX markets to a regime of self-regulation passed a long time ago - this handout to Wall Street banks should not now emperil the systemic regulation of shadow markets.

This conflict with Dodd-Frank shows the desperate need to have our "trade" rules catch up with our "financial" rules. Unfortunately, the services trade regime was crafted before the lessons of the financial crisis. The good news is, there's appetite from our trading partners - many of whom were cajoled into overcommitting in the WTO talks by Geithner in the 1990s - to reform the outdated rules. They just need to see a helping hand from the Obama administration, which up until now has simply been pushing further financial services deregulation through the Doha Round talks of the WTO.

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Fair trader wins in Peru... a third time.

Ollanta Humala, the fair trade candidate in Peru's presidential election, appears to have won a majority of the votes in the second and final round of voting. He bested Keiko Fujimori, who campaigned against fair trade.

We brought this story to your attention back in the first round of voting in April, and mentioned that there was a strong worry that there would be outside intevention. As Mark Weisbrot reported for the Guardian, there is a feeling on the ground that there were some U.S. interventions, although these may only be catalogued with time.

Humala has a long history of staking out fair trade positions. It will be interesting to see how his position evolves going forward, especially in the Trans-Pacific FTA negotiations.

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