Global Corporate Ambulance Chasing: Law Firms Recruiting Corporations to Attack COVID-19 Policies in ISDS ‘Corporate Courts’

By Melanie Foley

Many governments have taken urgent actions to stem the COVID-19 pandemic, save lives, protect jobs, counter economic disaster and ensure people’s basic needs are met.

But now, multinational corporations are poised to launch a wave of attacks against governments to demand compensation from taxpayers for these COVID-19 policies using the Investor-State Dispute Settlement (ISDS) regime.

ISDS grants rights to multinational corporations to sue governments before a panel of three corporate lawyers. These lawyers can award the corporations unlimited sums to be paid by taxpayers, including for the loss of expected future profits, on claims that a nation’s policy violates their rights. Their decisions cannot be appealed.

With ISDS included in many trade and investment agreements, more than 1,000 ISDS attacks have been launched against climate, financial, mining, medicine, energy, pollution, water, labor, toxins, development and other non-trade domestic policies. Corporations have been awarded millions or even billions of taxpayer dollars, and some countries have chosen to revoke their democratically enacted policies in order to reduce their payouts. 

How do we know that COVID-19 policies are the next ISDS target?

The law firms that profit enormously from the ISDS system have been advertising to multinational corporations about the lucrative opportunities to use ISDS to attack government actions. And, specialist law journals have speculated that “the past few weeks may mark the beginning of a boom” of ISDS cases.

The law firms have specifically targeted pandemic policies such as restrictions on business activities to limit the spread of the virus and protect workers, requirements for manufacturers to produce ventilators, mandatory relief from mortgage payments or rent for households and businesses, measures to ensure access to clean water for hand washing and sanitation, and more. All of these policies apply equally to domestic and foreign companies. But thanks to ISDS, foreign multinational corporations can launch cases and rake in taxpayer money in compensation.

“It is unfortunately very likely that a whole spate of ISDS attacks on governments’ COVID responses will begin to be filed,” said Lori Wallach, director of Public Citizen’s Global Trade Watch in her weekly Rethinking Trade podcast. “And the reason why is, under this regime, an enormous amount of money can be made by both the lawyers and the corporations. It is a legalized raid on treasuries.”

Public Citizen and more than 600 organizations from around the world are sounding the alarm. These labor, consumer, environmental, development and other civil society organizations sent a letter in July to heads of government worldwide urging action to avoid this new ISDS threat. They outlined an array of practical steps governments could take to immediately suspend the use of ISDS over pandemic response measures, as well as to put an end to the risks of all ISDS cases forever.

The powerful and diverse group of organizations from the United States includes the AFL-CIO, CWA, the Presbyterian Church USA, the United Methodist Church, Greenpeace and the Sierra Club. International signers include Oxfam, Doctors Without Borders, Friends of the Earth International and Action Aid.

For many decades, the United States was a leading proponent of this system and forced it on their trading partners. But public outrage over ISDS has been growing for years and was one of the reasons why the Trans-Pacific Partnership (TPP) could not get support to pass in Congress.

And thanks to civil society’s campaigning, ISDS was largely eliminated in the new NAFTA. (The original 1995 NAFTA was the first trade pact to include ISDS.) The unusually large, bipartisan votes in the Senate and House for the new NAFTA set a new standard that to be politically viable, U.S. trade pacts can no longer include extreme ISDS terms.

The agreements the United States is currently negotiating with the United Kingdom and Kenya, while potentially damaging in other ways, are reportedly not going to have ISDS. Other countries also have taken steps to withdraw from ISDS, including Bolivia, Ecuador, South Africa, India and Indonesia.

“These coming COVID cases should be exhibits 1, 2 and 3 of why other countries should also exit the regime,” advised Wallach.

Rethinking Trade - Season 1 Episode 15: What’s the Real Story With All the “Buy American” Hype?

Since the 1930’s, “Buy American” rules have required that the U.S. government purchase goods – from cars and computers to planes and paper – that are made in the United States. But these rules that recycle our tax dollars to support jobs and promote domestic innovation have been severely undermined by our trade policies in the last few decades.

Today, “Buy American” really means that companies and products from 60 countries must be given the same access to the almost $600 billion spent annually in U.S. government contracts as U.S. firms and products. Effectively, we now outsource our tax dollars to support jobs in other countries.

On this episode, we unpack these policies and examine both Donald Trump and Joe Biden’s recent Buy American policy proposals.

Transcribed by Kaley Joss

Ryan:

Welcome back to Rethinking Trade, where we don't just talk about trade policy, we fight to change it. I'm Ryan, and I'm joined once again by our in-house trade expert Lori Wallach.

Lori, a lot of people may have seen that Trump just issued an executive order on ‘Buy American’ rules. And last month Joe Biden announced his own Buy American plan. Before we dig into both of these, why don’t you just give us a brief overview of what Buy American rules are in general.

Lori: 

So, since Franklin Delano Roosevelt was president, the U.S. has had, as part of its federal law, a preference that when the federal government procures things, from cars and trucks for government fleets, to office furniture and desks and phones to paper, whatever it is, that the purchases are made of goods that are made in America. The idea is two-fold: first is to recycle tax dollars back into the economy, creating jobs and supporting communities in the United States. So, it’s a virtuous circle, where you have a job, you pay your taxes and those taxes come back into your community to buy things that are made in the community for people who paid those taxes.

The second thing is its an industrial policy tool for innovation-- because the government, by making long-term contracts in certain areas and setting certain criteria, can basically help a private market get created. A classic example is fuel-efficiency standards for automobiles. We all think of CAFE when we hear that, the corporate average fuel economy standards, that reference what the average is when you buy a car. But there are also federal requirements that a fleet of cars produced by a maker must have a certain average fuel efficiency standards. But initially, before that became required of all cars sold in the US, the US government fleet had to meet those rules.

So for a number of years, to create a demand, to create a market, to have the companies put the money and research into designing those more fuel efficient, economical cars, the government started setting standards that they had to meet for government purchases. So, if GM or Ford or Chrysler wanted to get a government contract, which of course is very lucrative because the government buys a lot of cars, then they had to have their cars be more fuel efficient and better for the environment. And after a number of years of the government fleet having that requirement and the investment being made, it was made federal law that all cars had to meet those standards. That kind of conditionality is done for various purposes. 

Another thing under that category is called prevailing wage laws, which apply also. Buy American is procurement of goods and services, Buy America is government money for construction, road building, schools and water systems. For Buy America, the contracts have to have prevailing wages, which means basically wages at the prevailing union wage in an area, so you can’t have subcontracts that are trying to cheat good, middle-class union jobs. So those kinds of policies, to reinvest, to innovate and to ensure conduct is rewarded, the conduct we want by government contracts, is what Buy America and Buy American laws are about. Again, Buy American from the thirties, and Buy America since the 1980s.

Ryan: 

So, what’s this executive order all about? We’ve talked about this on the podcast before, but there are already these rules as you’ve just explained. So why do we need an executive order to recognize these rules? Or maybe you can explain what this is and what is it actually doing?

Lori: 

So, there are two things that have been going on. First of all, the Buy American and Buy America rules have waivers. And one of the waivers is a ‘public interest’ or ‘national interest’ waiver, and effectively what that means is price.  And it’s not defined. The rule is not ‘if you can find something that is 25% cheaper, go for the foreign good and bypass the Buy American requirement’. Instead, it’s just open ended. So, a lot of agencies have started to waive Buy American broadly. If they find something that’s even 5% cheaper from another country, they just waive Buy America standards saying that it’s in the ‘national interest’ to do so, without thinking about, for instance what the COVID crisis has made so apparent: we need some production domestically. We need diverse sources of imports, and we need some domestic production so we have a reliable supply of essential goods. We cannot have a situation where we allow an entire sector, like we have in the manufacturing of antibiotics, or we have in a lot of PPE manufacturing, we can’t have that all hollowed out. 

So, by having these waivers we have gutted Buy American. But the biggest waiver is within trade agreements. And there’s a really sad and ugly story behind this. Big multinational manufacturing corporations wanted to outsource production of their cars, or for General Electric of their turbines and generators and lighting systems, of Boeing their airplanes, they still wanted to be able to get government Buy American-required contracts. But if they were doing their work in Mexico or China or wherever, obviously they wouldn’t qualify. So they got the genius idea of trying to ram into trade agreements yet another un-trade-related item, and that is just a made-up rule that any country that has a US trade agreement is considered American for buy-American purposes. So this waiver that’s now in place excuses Buy American rules, so that US government agencies get, basically, to waive Buy American privileges for 60 other countries. So “Buy American” now is Buy American or Japan or Korea or Mexico or Canada or all of Central America or a boatload of other countries- all of our free trade partners. And that waiver has meant practically that Buy American is now basically gutted.

Ryan: 

So, just to be clear, the New NAFTA also contains these waivers, correct?

Lori: 

It does. And this is the hypocrisy in all of this. That waiver system is something that, by statute, any US president can cancel, unilaterally. So for three and a half years, Donald Trump has had the ability, simply by executive order- one of the few things he really could have done legitimately by executive order- to just end that trade agreement waiver. It is a statutory delegation of authority for the President to be able to, basically, just issue what the list of waiver countries are. And it’s something that can be changed at any time. And as well, in the World Trade Organization (WTO), you can get out of those procurement rules that are in the agreement itself, without any penalty. 

Trump did a very early, first year in office, 2017 “Buy American Hire American'' executive order. And instead of fixing this huge exception that eats the rule, that executive order said that we have to have compliance with our international agreements. So basically it was a hoodwink, where I guess Trump hoped no one would realize what he was saying was “Hi! It’s Buy America Hire America, except we won’t!”, because he was saying to follow the current rules, that don’t actually let us buy American.

Now, this most recent order repeats some of that language, but for the first time it has a new thing. And my theory is that it has this new thing because it’s something that actually the Biden presidential campaign did. Which is, before Trump did this latest executive order, about a month ago, the Biden administration issued an order on what they were going to do on trade and domestic supply chains. And the most interesting thing in there in a way was is that they had in there a clause in this policy plan that says ‘we are going to change our trade agreements to make Buy American real,’ instead of saying ‘we’re going to change Buy American, to prioritize trade agreements.’ That is a pretty stunning shift for Biden, because that’s not necessarily a position Biden has had, but is definitely where the country is heading. The COVID crisis has made everyone realize, even people who have been big supporters of these trade agreements, realize we need to have some domestic manufacturing. We need to diversify our imports, but we also need to make some of this stuff for emergencies, like PPE and essential medicines. So that, I am guessing, is why this new Trump Buy American has a clause that orders our top trade official, the US Trade Representative, to renegotiate our trade agreements to allow domestic purchase, only of a variety of essential medicine supplies: PPE, medicines, supplies, etc. It’s sort of a catch-up, so that now both of the contenders in the US presidential race are taking a position that is much more similar to what the public position is. Polling shows repeatedly that people want, at like 80% of the public want Buy American rules strongly enforced, and want to reinvest their tax dollars into having the government buy American-made goods, so now both the Democratic and the Republic contender are suggesting we fix the trade agreement rules so we really do have Buy American. 

Now, whether or not that happens I suspect is going to take a lot of activism, because there are a lot of multinational corporations that have enjoyed having it both ways- they produce in Mexico, China, Vietnam and then they find a way to be able to still be able to get a government contract. Perversely, I actually think some the horror of the COVID-19 crisis could provide an opportunity for more people in this country to demand these kinds of changes with our procurement policy, to reinvest in building some production capacity for essential goods, for medicines, for PPE, for basic communications and electronics equipment, the things that we vitally need just to be healthy and secure, because up until now, unless you lost a job to outsourcing, or you were in a community that was devastated by outsourcing, and there are many of them across the country, but there are also a lot of people who haven't been directly touched, you may not have personally experienced how dangerous and devastating this model of hyperglobalization, under which we have been living, is for all of us. And that system is not from God, it’s one set of policies, one set of corporate rigged rules that incentivize those behaviors, 

So, there’s more of an interest in changing the rules to change the outcomes, because now everyone is facing the experience of “Oh my lord, my family isn’t safe because I can’t get a damn mask!” Or, “what do you mean we simply can’t make ventilators? We created the technology, the patents on the technology are here, what do you mean people could die because they can’t breathe?” Or, “my kid’s going to get infected because they can’t get the pump for the bottle for Purell, because it’s only made in China now, and that injection molding with the metal spring is not possible here?” 

People have lived with the results in a way that I think could build the demand to actually have not just our Buy American policies change, but the trade agreements change. So that yes, we can get the benefits of trade, of which there are many of them, but so we can basically remove the overreach into domestic policy space, in areas like: Why the hell are trade agreements dictating domestic procurement policies? States, through their state legislators, should decide how state dollars are spent when the state procures, not a trade agreement! The federal government, through Congress, should decide what the priorities are. I mean, hell, just think of it as climate policy. We are going to need to create a whole new set of demand for different kinds of technology for climate, or we’re going to kill ourselves and the planet. So how are we going to actually use policy tools to create those incentives if we’re not allowed, through government purchasing, to direct funds for that kind of innovation? So I think through the COVID-19 crisis and the climate crisis, there’s more awareness. So I think, if people get informed and get activated, we can actually see these changes come to fruition. 

Ryan:

Rethinking Trade is produced by Public Citizen’s Global Trade Watch. I would encourage you to visit rethinktrade.org as well as tradewatch.org to educate yourself and find out how you can get involved in the work we are doing to fight for fairer and more equitable trade policies.

Reps. García, Schakowsky, and 107 Members of Congress Urge Mexican President López Obrador to Drop Charges Against Activist and Protect Labor Rights

Today Reps. Jesús “Chuy” García (IL-04), Jan Schakowsky (IL-09), and 107 Members of Congress sent a letter to Mexican President Andrés Manuel López Obrador urging him to ensure Mexican state governments drop politically motivated charges against labor lawyer Susana Prieto Terrazas. The letter also urges Mexico to ensure states comply with the labor rights guaranteed by the US-Mexico-Canada Agreement (“USMCA”).

The US-Mexico-Canada Agreement, implemented on July 1 of this year, requires each of its signatory countries to respect workers’ rights. Last year, Mexico passed labor law reforms that strengthen collective bargaining and independent unions in the country.

Susana Prieto Terrazas, a Mexican labor rights activist, was imprisoned in June by the state government of Tamaulipas after years of organizing along the US-Mexico border. She was released on conditions that prevent her from continuing labor advocacy and require her to move to the Mexican state of Chihuahua, where the government has issued a warrant for her arrest.

“To protect workers’ rights in the United States, we must defend the rights of workers around the world and in Mexico. I’m sending a letter with more than 100 colleagues to call on Mexican President López Obrador to ensure that Mexico respects workers’ rights and ends its political persecution of labor activist Susana Prieto Terrazas,” said Congressman Jesús “Chuy” García. “American legislators cannot stay silent while corporate interests and corrupt politicians undermine the law to extract profits at the expense of working people. When the US-Mexico-Canada Agreement passed Congress, we were told it would protect workers’ rights and labor standards in the US and Mexico. But if state governments in Mexico can willfully violate basic labor rights provided by Mexican law and affirmed by the USMCA, these protections are meaningless.”

“Mexico must live up to its obligations under the USMCA and enforce labor laws completely and uniformly throughout the country,” Congresswoman Jan Schakowsky said. “Anything less than this is unacceptable, will render these labor protections meaningless, and will require action by U.S. Trade Representative Robert Lighthizer. I look forward to continuing to work with my colleagues in the U.S. as well as my counterparts in Mexico to strengthen workers’ protections across North America.”

 The rights of workers across North America must be enforced, including in Mexico, said Congressman Joaquin Castro, Chair of the Congressional Hispanic Caucus and Vice Chair of the House Foreign Affairs Committee. “The U.S.-Mexico-Canada Agreement (USMCA) has new labor provisions to guarantee worker’s rights to organize for better conditions and higher wages, and must be respected. The United States Congress needs to ensure our trading partners live up to their commitments to expand the rights of workers.”

A PDF of the letter can be found here.

Trump Trade Deficit 6.5% Higher than Obama’s Last Year, Not Eliminated as Then-Candidate Trump Promised

Trump Trade Deficit Increases Even as Trade Flows Show COVID-19 Effect, Dropping 15% in First Six Months of 2020 Compared to Same Period in 2019

The U.S. trade deficit in the first half of President Donald Trump’s fourth year in office remains 6.5% higher than in the same period in President Barack Obama’s last year, despite a 15% overall fall-off in trade flows related to the global pandemic, new trade data released by the U.S. Census Bureau shows.

“Worldwide COVID-19 has reduced trade flows, so the fact that Trump’s trade deficit is larger than  the same period in the last year of the Obama administration shines a big fat spotlight on Trump’s failure to ‘eliminate’ the trade deficit, which he promised endlessly as a candidate in 2016,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

Even as trade flows overall dropped 15%, the U.S. trade deficit in the first six months of 2020 was only down 9% relative to the same period in 2019. This is in part because imports from Mexico have begun to rise significantly. 

The new U.S. Census Bureau trade data showed that:

• The effects of the COVID-19 pandemic on commerce in general and trade in specific are evident in the six-month 2020 data: Comparing the trade flows in the first 6 months of 2019 to the same period in 2020, U.S. trade has decreased 15%.

• • Total U.S. goods and services exports in the first half of 2020 were $1,066 billion relative to $1,266 billion  in 2019. Imports in the first half of 2020 were $1,341 billion versus $1,563 billion  in 2019.

• The six-month 2020 trade deficit is 6.5% higher than the deficit for 2016, the year before Trump took office, even as the COVID-19 effect reduced the deficit 9% compared to the first six months of 2019. Comparing the first half of Obama’s last year in office (January to June 2016), the overall trade deficit increased 6.5% rising from $257 billion to $274 billion in inflation-adjusted terms. (The unadjusted figures provided in the government data base show a rise from $238 billion to $274 billion.)

• • The overall U.S. goods and service trade deficit with the world dropped 9% in first half of 2020 relative to the same period in 2019 from $301 billion to $274 billion in inflation-adjusted terms (The unadjusted figures provided in the government data base show a drop from $297 billion to $274 billion.)

• • The U.S. trade deficit in goods decreased 7.5% in inflation-adjusted terms from $446 billion in the first six months of 2019 to $412 billion in the same period of 2020. However, the trade deficit in goods during these months is still 3% higher than the one experienced in the same period of 2016, rising from $399 billion to $412 billion (inflation-adjusted dollars).

• The China deficit is down relative to Obama’s last year, but there is “trade diversion” effect of imports increasing from other countries. 

• • The trade deficit with China decreased 22% in inflation-adjusted terms going from $169 billion in the first half of 2019 to $132 billion in the first half of 2020. It is also smaller compared to 2016, when in inflation-adjusted dollars, it was $173 billion for January to June.

• • In inflation-adjusted dollars, the goods trade deficit with the rest of the world (excluding China) increased from $277 billion to $280 billion in the first half of 2020 relative to the same period in 2019.

• The deficit with North American Free Trade Agreement (NAFTA) partners is 11% higher in the first half of 2020 relative to the same period in Obama’s last year in office but down relative to 2019 even as Mexican exports to the U.S. began to expand significantly in June.

• • The NAFTA deficit in the first six months of 2020 was $97 billion, 11% higher than the same period in 2016 when it was equivalent to $88 billion in inflation-adjusted dollars. (In nominal terms the goods trade deficit with NAFTA parties increased by 18%, or $15 billion.)

• • The goods trade deficit with NAFTA parties decreased by $19 billion in inflation adjusted terms compared to the same period in 2019, largely because of measures taken to prevent the spread of COVID-19.

• • Even as the COVID-19 pandemic narrowed the trade deficit with NAFTA parties during the first half of 2020 compared to 2019, the reduction was not as large as expected given the jump of Mexican exports in June. According to the data released by Mexico’s statistics authority Mexico’s statistics authority (the National Institute of Statistics and Geography), Mexican exports, of which more than 80% are destined to U.S. markets, grew 75.5% in June relative to May. This resulted in Mexico posting a six-month January to June surplus of $2.6 billion even as Mexican exports decreased overall 12.8% compared to June 2019, Mexican imports dropped almost 10% more in the same period (22.2%).