2014 Trade Data Deal Further Blows to the Push for Fast Track

2014 Trade Data Reveal Surging U.S. Trade Deficits Under Korea FTA and NAFTA, and a Dramatic Failure to Meet Obama’s Export-Doubling Goal

Today’s release of the corrected 2014 annual trade data from the U.S. International Trade Commission reveal that President Barack Obama’s goal of doubling exports has failed dramatically, with a growing trade deficit with Korea under the U.S.-Korea Free Trade Agreement (FTA) and a burgeoning non-fossil fuel trade deficit with North American Free Trade Agreement (NAFTA) partners. Even as overall U.S. exports increased slightly due to growing U.S. fuel exports, manufacturing exports stagnated, according to projections. The data show that continuing with more-of-the-same trade policies would kill more middle-class jobs, dampen wages and increase income inequality – outcomes contrary to Obama’s “middle-class economics” agenda. The abysmal trade data are likely to reinforce congressional opposition to Obama’s bid to expand the status quo trade model by Fast Tracking the Trans-Pacific Partnership (TPP). 

  • Obama’s Five-Year Export-Doubling Plan Failed, in Part Thanks to His 2011 Korea FTA: The context for Obama’s 2015 State of the Union ask for Fast Track for the TPP is the abysmal failure
    of his 2010 State of the Union trade initiative – a plan to double U.S. exports in five years. The 2014exportgoal2014 data show U.S. goods exports over those five years have increased by just 36 percent, falling more than $660 billion short. U.S. goods exports grew by less than 1 percent in 2014 – the same average rate of the prior two years. (The first two years of stronger export growth represented recovery from the worldwide crash in trade flows after the global financial crisis.) At the paltry 2012-2014 annual export growth rate, which is a fraction of the 4 percent average annual export growth seen in the decade before the Obama administration, Obama’s export-doubling goal would not be reached until 2057 – 43 years behind schedule.
  • U.S. Exports Declined Under the Korea FTA, While Imports and the U.S. Trade Deficit with Korea Soared: Today’s data release also reveals a 14 percent increase in the U.S. goods trade deficit with Korea in 2014, marking the third consecutive year of substantial growth in the U.S. 2014koreatrade deficit with Korea since the 2011 passage of the Korea FTA, which U.S. negotiators used as the template for the TPP. The 2014 U.S. goods trade deficit with Korea topped $26 billion, a 72 percent increase over the trade deficit in 2011 before the FTA took effect. U.S. exports remain lower than the level before the FTA went into effect, as imports have increased 17 percent. Had U.S. exports to Korea continued to grow at the rate seen in the decade before the FTA’s implementation, exports would be about 18 percent, or $7 billion, higher in 2014 than they actually were. The resulting trade deficit increase represents more than 70,000 lost American jobs, according to the ratio the Obama administration used to project gains from the deal. Ironically, 70,000 is the number of jobs the Obama administration promised would be gained from the Korea FTA.
  • Non-Fuel NAFTA Trade Deficit Grows: The 2014 trade data are also projected to show a more than 12 percent, or $10 billion, increase in the non-fossil fuel U.S. goods trade deficit with NAFTA partners Canada and Mexico. The overall U.S. goods trade deficit with NAFTA partners, which also increased in 2014, has ballooned $155 billion, or 565 percent, under 21 years of the pact, reaching $182 billion in 2014.
  • Contrary to the Administration’s TPP Sales Pitch That More FTAs Would Boost U.S. Exports, U.S. Exports to FTA Partners Have Grown More Slowly Than U.S. Exports to the Rest of the World Over the Past Decade. Taking into account the data for 2014, average annual U.S. export growth to all non-FTA partners in the past 10 years outpaced that to FTA partners by 24 percent.
  • The United States Has a Large Trade Deficit with FTA Partners: Overall, the aggregate U.S. trade deficit with all U.S. FTA partners topped $177 billion in 2014, marking a more than $143 billion, or 427 percent, increase in the aggregate U.S. FTA trade deficit since the pacts were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $95 billion, or 11 percent, since 2006 (the median entry date of existing FTAs). Despite this, U.S. Trade Representative (USTR) Michael Froman testified to Congress last month that we have a trade surplus with the group of FTA nations.

Heads Up for Distorted Data…

Given that the record of lagging U.S. exports and surging trade deficits under U.S. FTAs jeopardizes Obama’s prospects for obtaining Fast Track, the administration may try to obscure the results with distorted data. The USTR has taken to lumping foreign-made products in with U.S.-produced exports, which artificially inflates U.S. export figures and deflates U.S. trade deficits with FTA partners.

“Foreign exports,” also known as “re-exports,” are goods made abroad, imported into the United States, and then re-exported without undergoing any alteration in the United States. Foreign exports support zero U.S. production jobs. Each month, the U.S. International Trade Commission (USITC) reports trade data with foreign exports removed, providing the official government data on made-in-America exports. But the USTR likely will choose to use the uncorrected raw data, as it has in the past, that the U.S. Census Bureau released last Thursday, which counts foreign-made goods as U.S. exports. Our figures are based on the corrected data.

By using the distorted data, the USTR may errantly claim an aggregate trade surplus with all U.S. FTA partners, though the actual 2014 U.S. goods trade balance with FTA partners is a more than $177 billion trade deficit. By counting foreign exports as “U.S. exports,” the USTR can artificially eliminate more than two-thirds of this FTA deficit, shrinking it to less than $57 billion. The USTR may misleadingly claim an FTA trade surplus by then adding services trade surpluses with FTA partners, which pale in comparison to the massive FTA trade deficit in goods when properly counting only American-made exports.

The USTR also may repeat its bogus claim that the United States has a trade surplus with its NAFTA partners by errantly including foreign exports as “U.S. exports,” removing fossil fuels and adding services trade data. But even after removing fossil fuels (coal, oil and natural gas) and adding services 2014naftare-exporttrade surpluses, the United States still had a projected NAFTA trade deficit of $50 billion in 2014. Indeed, the fossil fuels share of the NAFTA trade deficit declined in 2014, and U.S. exports of services to NAFTA partners fell, according to projections. The USTR can make its errant claim of a “NAFTA surplus” only by including foreign exports, which artificially reduces the NAFTA goods trade deficit to less than half of its actual size.

The USTR also may boast about an increase in U.S. exports to Korea in 2014, while ignoring the much larger increase in imports from Korea. While U.S. goods exports to Korea in 2014 increased by $2.3 billion, imports from Korea have risen by $5.6 billion, spelling a $3.3 billion increase in the U.S. goods trade deficit with Korea in the third calendar year of the Korea FTA.

Moreover, U.S. exports to Korea have declined since the FTA went into effect and did not return to the pre-FTA level in 2014. Monthly imports from Korea repeatedly broke records in 2014, such as in October when imports from Korea topped $6.3 billion – the highest level on record.

Expect the administration to repeat the same data trick it employed last year with respect to U.S. auto sector exports to Korea. Exports to Korea of U.S.-produced Fords, Chryslers and General Motors vehicles increased by fewer than 3,100 vehicles per year in the first two years of the Korea FTA. But given that exports of “Detroit 3” vehicles before the FTA were also tiny – fewer than 8,200 vehicles per year – the USTR expressed the small increase as a significant percentage gain in a press release. The USTR did not mention that more than 184,000 additional Korean-produced Hyundais and Kias were imported and sold in the United States in each of the Korea FTA’s first two years, in comparison to the two years before the FTA, when Hyundai and Kia imports already topped 1 million vehicles per year.

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Obama vs. Obama: The State of the Union's Self-Defeating Trade Pitch

In his State of the Union address tonight, President Obama called for job creation, reduced income inequality, more affordable healthcare and better regulation of Wall Street. 

He also called for Fast Tracking the Trans-Pacific Partnership (TPP) – a controversial “trade” deal that would undermine all of the above.

Here's a side-by-side analysis of how Obama's push to Fast Track the TPP contradicts his own State of the Union agenda:

Obama’s Agenda

The TPP’s Counter-Agenda

Income Inequality: “Will we accept an economy where only a few of us do spectacularly well? Or will we commit ourselves to an economy that generates rising incomes and chances for everyone who makes the effort?”

An “economy where only a few of us do spectacularly well” is actually the projected outcome of the TPP. A recent study finds that the TPP would spell a pay cut for all but the richest 10 percent of U.S. workers by exacerbating U.S. income inequality, just as past trade deals have done

Manufacturing revival: “More than half of manufacturing executives have said they’re actively looking at bringing jobs back from China. Let’s give them one more reason to get it done.”

The TPP would give manufacturing firms a reason to offshore jobs to Vietnam, not bring them back from China. The TPP would expand NAFTA’s special protections for firms that offshore American manufacturing, including to Vietnam, where minimum wages are a fraction of those paid in China. Since NAFTA, we have endured a net loss of more than 57,000 U.S. manufacturing facilities and nearly 5 million manufacturing jobs.

American jobs: “So no one knows for certain which industries will generate the jobs of the future. But we do know we want them here in America.”


TPP rules would gut the popular Buy American preferences that require government-purchased goods to be made here in America, preventing us from recycling our tax dollars back into our economy to create U.S. jobs.

Exports: “Today, our businesses export more than ever, and exporters tend to pay their workers higher wages.”

Those who wish for more exports should wish for a different trade agenda. U.S. exports to countries that are part of TPP-like deals have actually grown slower than exports to the rest of the world, according to government data. Under the Korea deal that literally served as the template for the TPP, U.S. exports have actually fallen.

Small businesses: “21st century businesses, including small businesses, need to sell more American products overseas.”

Small businesses have endured declining exports and export shares under pacts serving as the model for the TPP. Small businesses suffered a steeper downfall in exports than large firms under the Korea trade pact, and small businesses’ export share has declined under NAFTA.

Economic growth: “Maintaining the conditions for growth and competitiveness. This is where America needs to go.”

An official U.S. government study finds that the economic growth we could expect from the TPP is precisely zero, while economists like Paul Krugman have scoffed at the deal’s economic significance.

Middle class wages: “Of course, nothing helps families make ends meet like higher wages.”

The TPP would put downward pressure on middle class wages, just as NAFTA has, by offshoring the jobs of decently-paid American manufacturing workers and forcing them to compete for lower-paying, non-offshoreable jobs.

Legacy of past trade deals: “Look, I’m the first one to admit that past trade deals haven’t always lived up to the hype, and that’s why we’ve gone after countries that break the rules at our expense.”

Past trade deals have resulted in massive trade deficits and job loss not because the pacts’ rules have been broken, but because of the rules themselves. The TPP would double down on NAFTA’s rules – the opposite of Obama’s promise to renegotiate the unpopular pact – by expanding NAFTA’s offshoring incentives, limits on food safety standards, restrictions on financial regulation and other threats to American workers and consumers.

Affordable medicines: “…middle-class economics means helping working families feel more secure in a world of constant change. That means helping folks afford …health care…”

The TPP would directly contradict Obama’s efforts to reduce U.S. healthcare costs by expanding monopoly patent protections that jack up medicine prices and by imposing restrictions on the U.S. government’s ability to negotiate or mandate lower drug prices for taxpayer-funded programs like Medicare and Medicaid.

Wall Street regulation: “We believed that sensible regulations could prevent another crisis…Today, we have new tools to stop taxpayer-funded bailouts, and a new consumer watchdog to protect us from predatory lending and abusive credit card practices…We can’t put the security of families at risk by…unraveling the new rules on Wall Street…”

Senator Warren has warned that the TPP could help banks unravel the new rules on Wall Street by prohibiting bans on risky financial products and “too big to fail” safeguards while empowering foreign banks to “sue” the U.S. government over new financial regulations.

Internet freedom: “I intend to protect a free and open internet…”

The TPP includes rules that implicate net neutrality and that would require Internet service providers to police our Internet activity – rules similar to those in the Stop Online Piracy Act (SOPA) that was rejected as a threat to Internet freedom.

National interests: “But as we speak, China wants to write the rules for the world’s fastest-growing region. That would put our workers and businesses at a disadvantage. Why would we let that happen?”

With the TPP, multinational corporations want to write the rules that would put our workers at a disadvantage and undermine our national interests. TPP rules, written behind closed doors under the advisement of hundreds of official corporate advisers, would provide benefits for firms that offshore American jobs, help pharmaceutical corporations expand monopoly patent protections that drive up medicine prices, give banks new tools to roll back Wall Street regulations, and empower foreign firms to “sue” the U.S. government over health and environmental policies. Why would we let that happen? 

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On Fifth Anniversary of Peru FTA Bagua Massacre of Indigenous Protestors, State Department Cables Published on Wikileaks Reveal U.S. Role

Now, Obama Administration Seeks to Further Expand the Foreign Investor Privileges That Led to Amazon Standoff Via the Trans-Pacific Partnership Pact

On the fifth anniversary of a deadly confrontation in Peru spurred by controversial policies enacted to comply with the U.S.-Peru Free Trade Agreement (FTA), Amazon Watch and Public Citizen expressed extreme concern over recently revealed U.S. diplomatic cables showing the U.S. government’s role in the violence that resulted in the deaths of at least 32 people.

On June 5, 2009, Peruvian security forces attacked several thousand indigenous Awajun and Wambis protestors, including many women and children, who were blocking the “Devil's Curve,” a jungle highway near Bagua, 600 miles north of Lima. The protestors were demanding revocation of decrees providing new access to exploit their Amazonian lands for oil, gas and logging that had been enacted to conform Peruvian law to FTA requirements.

“The Bagua massacre is emblematic of how so-called free trade agreements enable an environment in which governments trample the basic rights of grassroots communities while promoting the destruction of natural resources,” said Atossa Soltani, founder and executive director of Amazon Watch. “Instead of defending the constitutional rights of Peru’s indigenous peoples, the U.S. government apparently encouraged the Peruvian government to steamroll the people protecting their land from exploitation.”

Public Citizen received only heavily redacted diplomatic cables in response to a Freedom of Information Act request regarding the U.S. role in the 2009 Peruvian crisis over FTA implementation. But now WikiLeaks has published the full text of messages between the State Department and the embassy in Lima.

Four days before the killings, a cable addressed the growing indigenous protests, stating, “Should Congress and [Peruvian] President Garcia give in to the pressure, there would be implications for the recently implemented Peru-US Free Trade Agreement.” This mirrored public comment by Peruvian government officials who argued that acceding to indigenous demands to annul controversial new laws would doom the entire FTA.

U.S. officials argued that the Peruvian government was being too lenient by allowing the indigenous roadblocks to continue. “The government's reluctance to use force to clear roads and blockades is contributing to the impression that the communities have broader support than they actually do,” the cable read.

On the day of the killings, the U.S. Embassy in Lima sought to justify the government’s actions, stating in another cable that the security forces in Bagua had “reluctantly chosen to enforce the rule of law.” Unacknowledged was the fact that the groups blocking the road at the “Devil’s Curve” had expressed their intention to demobilize on June 5 starting around midday. The Peruvian riot police went in that morning at the break of dawn.

In a letter sent on June 12, 2009, 15 nongovernmental organizations urged the Obama administration to speak out publicly against the violent repression and to state that repeal or reform of the controversial laws would not conflict with Peru’s obligations under the FTA. No public statement was issued.

What has become known as the “Amazon’s Tiananmen” brought the realities of the U.S.-Peru FTA into sharp relief. Rather than being a new trade agreement model, as it was sold, at the FTA’s heart were the same extreme investor rights that animated the North American Free Trade Agreement (NAFTA).

“The fifth anniversary of the Peru FTA Bagua massacre is a most appropriate time to reconsider the U.S. approach to the Trans-Pacific Partnership (TPP),” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The U.S.-Peru FTA makes clear even improved labor and environmental chapters cannot overcome the NAFTA-style investor protections at the core of the Peru FTA and now TPP.”

When Congress passed the U.S.-Peru FTA in late 2007, a majority of House Democrats opposed the deal. And no labor, environmental, consumer, family farm or faith group supported it. While Democratic House trade committee leaders had forced some improvements with respect to access to medicine and the FTA’s labor and environmental chapters, the pact included an expansion of NAFTA-style investor privileges.

The FTA’s foreign investor privileges were demonstrated when a U.S. firm pressured Peru’s government to reopen a smelter that had severely poisoned hundreds of children in La Oroya, Peru with lead – a story revealed in a Bloomberg exposé.

Now the Obama administration is pushing for inclusion of the same extreme foreign investor privileges in the TPP it is negotiating with Peru and 10 other Pacific Rim countries.

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Second Anniversary of Colombia Pact Spotlights Administration's Failed Promise of Labor Rights Improvements, Now Recycled to Defend TPP Negotiations with Vietnam amid Worker Riots

Today, as foreign-owned factories in Vietnam lie smoldering after protesting Vietnamese workers burnt them to the ground, Obama administration officials are in Vietnam negotiating a Trans-Pacific Partnership (TPP) pact that would place U.S. workers in direct competition with their Vietnamese counterparts. 

While politics provided the spark for Vietnam’s recent worker riots, the country’s notorious working conditions fanned the flames.  According to the U.S. government, the International Labour Organization, and workers' rights groups, those conditions include “children working nine to 12 hours per day for low pay in hazardous working conditions,” forced labor, discrimination against pregnant women, blocked fire exits, prohibition of independent unions, and minimum wages dwarfed by those paid in China.

Members of Congress, U.S. labor unions and human rights groups have made clear that the U.S. government should not be contemplating a pact with a country where workers’ rights are systematically violated. 

That same argument motivated widespread opposition to the U.S.- Colombia “free trade” agreement (FTA), which took effect two years ago today. 

The Colombia pact was implemented despite warnings from Congress and labor groups that U.S. workers should not be pitted against workers in a country consistently listed as the world’s most dangerous place to be a unionist.  The Obama administration helped push the FTA through the U.S. Congress over record Democratic opposition with promises that the gross workers’ rights violations in Colombia would wane under the FTA.  The administration declared that a Labor Action Plan (LAP) signed with Colombia in 2011 as a fig leaf for the FTA would “lead to greatly enhanced labor rights in Colombia.”

After two years of FTA implementation, that promise rings hollow as Colombia’s unionists face persistent murders, death threats, and repression. 

Now, in response to growing opposition to the notion of a TPP pact with Vietnam, the Obama administration is conjuring up the same failed promise, asserting that working conditions in Vietnam will improve under the pact. 

Members of Congress are not likely to buy the recycled pitch, as the two-year anniversary of the Colombia FTA spotlights the harrowing violence still faced by Colombia’s union workers. Colombia’s National Union School, recognized by the LAP as an authoritative source of monitoring data, reports that:

  • In the three years since the LAP was unveiled, 73 Colombian unionists have been murdered.  There were four more unionist murders in 2013 than in 2012.
  • Colombia’s union workers have endured 31 murder attempts and 953 death threats since the LAP was announced.  These crimes have not resulted in any captures, trials, or convictions.
  • More than 3,000 unionists have been murdered in Colombia since 1977. The overall impunity rate for these murders is 87%.
  • Since 1977, Colombian unionists have received 6,262 recorded death threats.  Only 4 of these threats have been punished, meaning that impunity for anti-union death threats stands at 99.9%.

Undeterred by the ongoing repression of Colombian workers, U.S. trade negotiators are in Vietnam at this very moment in attempt to negotiate via the TPP an expansion of the FTA model to Vietnam, despite the country’s widespread labor abuses.  Under the TPP, U.S. workers would be placed into direct competition with Vietnamese workers facing these on-the-ground realities:

  • Child labor:  According to the Vietnam government’s own estimates, more than 25,000 Vietnamese children work in hazardous conditions.  The U.S. State Department reports that Vietnam government inspectors have found “children working nine to 12 hours per day for low pay in hazardous working conditions (including poor lighting, dusty environments, and the operation of heavy machinery)…”
  • Forced labor:  Individuals detained, but not convicted, for drug offenses are required to work for little to no pay in government detention centers as part of their “treatment,” according Human Rights Watch and the State Department.  Vietnam is one of just four countries in the world cited by the U.S. Department of Labor for using both forced labor and child labor in apparel production.
  • Low wages:  Vietnam’s average minimum wage is 52 cents per hour.  That’s a fraction of minimum wages even in China.  And it’s one-fourteenth of the earnings of U.S. minimum wage workers who would be pitted against their Vietnamese counterparts. 
  • Unsafe working conditions:  The International Labour Organization reports that even after inspecting Vietnamese garment factories on three occasions for fire hazards, 41% of the inspected factories still had inaccessible or blocked fire exits. 
  • Violations of women’s rights:  Vietnamese factories have employed several discriminatory methods to try to avoid the legal obligation to provide paid maternity leave to pregnant workers. Last year the Vietnamese press revealed that one factory required female workers to sign a contract vowing not to get pregnant for their first three years of employment. 
  • Union repression:  Vietnam bans independent unions.  Workers wishing to organize for their rights must affiliate their union with the Vietnam General Confederation of Labor, a self-described “member of the political system under the leadership of the Communist Party of Vietnam.”  The Worker Rights Consortium reports that Vietnamese workers attempting to form independent unions have been “subjected to sustained campaigns of prosecution and imprisonment.” 

In the face of such entrenched labor abuses, it is incredible that the administration is trotting out the same message used for the Colombia FTA: “Don’t worry –- workers’ conditions will improve once the FTA is in place.”  After two years of the Colombia deal, Colombia’s workers sadly beg to differ.  

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Corporate Group Launches “Fact-Based” Trade Series, Avoids Facts

When launching a new series of materials touted as “fact-based analysis,” it is unwise to begin with a distortion of the facts.  But that’s the inauspicious move taken today by the Emergency Committee for American Trade (ECAT), a corporate alliance that has launched a new “Trade Notes” series with some confused data on the record of U.S. trade under “free trade” agreements (FTAs).  

Official government data show that U.S. trade deficits have ballooned with FTA partners while actually diminishing with the rest of the world.  As we reported recently, the aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion, or 443%, since the FTAs were implemented.  In contrast, the aggregate deficit with all non-FTA countries (even including China) has decreased by more than $130 billion, or 16%, since 2006 (the median entry date of existing FTAs). 

Two factors explain this proclivity toward trade deficits with FTA partner countries.  First, imports from those countries have spiked – an unsurprising result of a trade model that has incentivized offshoring and pitted U.S. workers against their lower-wage counterparts abroad.  Second, and perhaps more surprising, is that U.S. export growth to FTA partner countries, despite all promises to the contrary, has been slower than to non-FTA countries. Indeed, growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.

But that isn’t the takeaway from ECAT’s Trade Notes debut today.  In response to “some commentators [who] have argued that trade agreements drive growth in U.S. trade deficits,” ECAT asserts, “recent data suggest that trade agreements, on the whole, actually help to improve U.S. trade balances with FTA partner countries.” 

How can ECAT make this claim?  First, they take oil and gas out of the trade data. Echoing the refrain of many FTA proponents that burgeoning FTA deficits are just about oil imports, ECAT displays a chart that appears to show aggregate non-oil trade deficits with FTA partners diminishing and then turning into surpluses over the last decade.

But the official government data beg to differ.  Even if we remove oil and gas, the non-oil U.S. goods trade balance last year with all U.S. FTA partners was a $100 billion deficit, not a surplus. And while ECAT claims that the non-oil trade balance with FTA countries has been improving, the non-oil U.S. trade deficit with these 20 countries was larger last year than in any of the last six years. 

What, then, explains the gulf between the data and ECAT’s claim of a growing non-oil surplus with FTA countries?  The primary explanation is that ECAT – like the U.S. Trade Representative and fellow corporate conglomerates such as the Chamber of Commerce, National Association of Manufacturers, Business Roundtable, etc. – has decided to count foreign-made exports as U.S. exports.  As we’ve explained time and again, determining FTAs’ impacts on U.S. jobs requires counting only U.S.-made exports.  Instead, ECAT also counts “re-exports” – goods made abroad that are shipped through the United States en route to a final destination.  As re-exports to FTA partner countries have been steadily increasing, counting them in trade data – as ECAT does – has had an increasingly distortionary effect on the true record of FTAs (e.g. you can make the NAFTA deficit look half as big simply by counting foreign-made re-exports as U.S. exports). 

In announcing today’s new Trade Note series, ECAT President Calman Cohen stated, “ECAT member companies recognize the importance of maintaining a fact-based dialogue on the contribution of trade and investment to our national economic interest.  ECAT seeks to make a constructive contribution to that dialogue through its new Trade Notes series.”

We’re all for contributions to fact-based dialogue.  Let’s hope we start seeing some from ECAT.  

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Colombia's Anti-Union Violence Remains Rampant after Three Years of the FTA-Enabling Labor Action Plan

Three years ago, the Obama administration signed a Labor Action Plan (LAP) with the Colombian government, promising that it would help rectify rampant labor rights abuses in Colombia, a country in which more than 3,000 unionists have been murdered since 1977.

Six months after its announcement, the LAP served as a fig leaf for the controversial Colombia “free trade” agreement (FTA), enabling the deal’s passage in the U.S. Congress. Trying to fend off criticism for pitting U.S. workers against Colombian workers who faced widespread labor abuses, the few Democratic members of Congress who voted for the deal pointed to the LAP as a solution to Colombia's labor rights crisis.  

Unions and congressional labor rights defenders in Colombia and the United States warned at the time of the FTA’s passage that the LAP would fail to alter the on-the-ground reality of anti-union repression. 

Sadly, they were right. 

In the three years since the LAP was unveiled, 73 Colombian unionists have been murdered, according to a report released today by Colombia’s National Union School, a group recognized by the LAP as an authoritative source of monitoring data. There were four more unionist murders in 2013 than in 2012.

Colombia’s workers have also endured 31 murder attempts and 953 death threats since the LAP was announced.  These crimes have not resulted in any captures, trials, or convictions. The overall impunity rate for unionist murders from 1977 through the present is 87%, while impunity for anti-union death threats stands at 99.9%. 

Colombia’s unions and the National Union School conclude that the decision to sign the LAP “was taken by the Colombian government as a step toward unfreezing the FTA with the United States rather than as an institutional mechanism to promote real protection of the labor and union rights that Colombian workers have lacked for so long.”

The same, unfortunately, could probably be said about some members of the U.S. Congress who were more interested in the LAP’s ability to provide political cover for the polemical Colombia FTA than its ability to provide relief to Colombia’s repressed workers.

Other members of Congress who supported the LAP with a sincere desire to improve the labor rights situation in Colombia (despite warnings from on-the-ground experts that the LAP would fail to do so) must feel betrayed by the administration officials who promised the LAP would herald such improvement.

Now the administration is making similar promises in pushing the Trans-Pacific Partnership (TPP), a sweeping deal with 11 Pacific Rim countries, including Vietnam.  While Vietnam does not share Colombia's history of widespread unionist murders, workers in Vietnam are prohibited from forming independent unions and are paid an average minimum wage of 52 cents per hour. And Vietnam's apparel industry, which could gain greater access to the U.S. market through the TPP, relies on forced labor and child labor.  

Administration officials are arguing, as they did in pushing the LAP and the Colombia FTA, that the TPP will provide an opportunity to curb labor rights abuses in Vietnam. Will the members of Congress who supported the ill-fated LAP once again buy into such promises?  Or will they heed the lesson of the ongoing repression faced by Colombia's workers?  

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U.S. Trade Deficits Have Grown More Than 440% with FTA Countries, but Declined 16% with Non-FTA Countries

The aggregate U.S. goods trade deficit with Free Trade Agreement (FTA) partners is more than five times as high as before the deals went into effect, while the aggregate deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations. Incredibly, the U.S. Chamber of Commerce website states, “For those worried about the U.S. trade deficit, trade agreements are clearly the solution – not the problem.” Their pitch ignores the import surges contributing to growing deficits and job loss, while their export “data” is inflated, using tricks described below.

The aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion (inflation-adjusted) since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $130 billion since 2006 (the median entry date of existing FTAs). Two reasons: a sharp increase in imports from FTA partners and significantly lower export growth to FTA partners than to non-FTA nations over the last decade. Using the Obama administration’s net exports-to-jobs ratiothe FTA trade deficit surge implies the loss of about 800,000 U.S. jobs. Trade with Canada and Mexico (our first and third largest trade partners, respectively) contributed the most to the widening FTA deficit. Under the North American Free Trade Agreement (NAFTA), the U.S. deficit with Canada ballooned and the small U.S. surplus with Mexico turned into a nearly $100 billion deficit. The trend persists under new FTAs – two years into the Korea FTA, the U.S. trade deficit with Korea has jumped more than 51 percent. Reducing the massive trade deficit requires a new trade agreement model, not more of the same.

U.S. Export Growth Falters under FTAs

Growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade. Between 2003 and 2013, U.S. goods exports to FTA partner countries grew by an annual average rate of only 4.9 percent. Goods exports to non-FTA partner countries, by contrast, grew by 6.3 percent per year on average. Since 2006, when the number of FTA partner countries nearly doubled with the implementation of the Central America Free Trade Agreement (CAFTA), the FTA export growth “penalty” has only increased. Since then, average U.S. export growth to non-FTA partner countries has topped average export growth to FTA partners by 47 percent.

Corporate FTA Boosters Use Errant Methods to Claim Higher Exports under FTAs

Members of Congress will invariably be shown data by defenders of our status quo trade policy that appear to indicate that FTAs have generated an export boom. Indeed, to promote congressional support for new NAFTA-style FTAs, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) have funded an entire body of research designed to create the appearance that the existing pacts have both boosted exports and reversed trade deficits with FTA partner countries. This work relies on several methodological tricks that fail basic standards of accuracy:

  • Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.
  • Counting “re-exports:” NAM has misleadingly claimed that the United States has a manufacturing surplus with FTA nations by counting as U.S. exports goods that actually are made overseas – not by U.S. workers. NAM’s data include “re-exports” – goods made elsewhere that are shipped through the United States en route to a final destination. Determining FTAs’ impact on U.S. jobs requires counting only U.S.-made exports.
  • Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 443 percent aggregate FTA deficit surge, its omission vastly skews the findings.
  • Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.
  • Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $251 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.

Chart: U.S. Trade Deficit Rises by $147 Billion with FTA Partners, Falls by $131 Billion with Rest of the World

FTA v non-FTA 3

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The 2014 Trade Agenda: What Hole? Keep Digging.

The President’s 2014 Trade Policy Agenda, released today by the Office of the U.S. Trade Representative (USTR), violates the first law of holes: when you are in one, stop digging. Instead, it sticks to the first rule of PR, when the data is against you (e.g. when export growth under last year's trade agenda amounted to zero percent), distract. 

In the face of large U.S. trade deficits with Free Trade Agreement (FTA) partners, the report declines to count imports and counts exports when convenient. It tries to camouflage the damaging track record of past deals (“forget about the hole”) to sell to the U.S. Congress and public yet another round of FTAs (“just keep digging”). 

The report states that the administration is “working with Congress” to gain Fast Track authority to enact two sweeping and controversial new FTAs – the Trans-Pacific Partnership (TPP) and Trans-Atlantic Free Trade Agreement (TAFTA). It neglects to mention that, having seen the hole created by past Fast Tracked FTAs, members of Congress have stated in overwhelming, bipartisan fashion that they have no interest in handing the administration another shovel labeled “Fast Track.”

Much of the 2014 agenda is a copy and paste of the 2013 agenda, reiterating USTR’s stock set of talking points, such as the tired, counterfactual promise that a more-of-the-same trade policy will boost exports. In 2013, this is how USTR put it: “The Obama Administration’s trade policy helps U.S. exporters gain access to billions of customers beyond our borders to support economic growth in the United States and in markets worldwide.” This year they invert the sentence: “We seek to…strengthen our economy by…negotiating high standard agreements that help U.S. exporters gain access to billions of customers beyond our borders.”

But repetition does not make the argument any truer. Under the array of FTAs that have served as a template for the Obama administration’s trade policy agenda, U.S. exports grew by a grand total of 0% last year. The year before that, they grew by 2%.  At the abysmal export growth rate seen in the last two years, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule. (The authors of this year’s Trade Policy Agenda opt not to highlight the ill-fated goal.)  

Also omitted is the inconvenient fact that the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  

Even more glaring is the report's lack of any mention of how exports to Korea have fared under the Korea FTA, which has its second anniversary in less than two weeks, despite detailing export performance to other countries. Under the Korea FTA, which served as the administration’s opening offer for the TPP negotiations, U.S. goods exports to Korea have fallen below the average monthly level seen before the FTA for 20 out of 21 months. Rather than deal with this reality, the report tries to hide it.

The data simply do not support the oft-parroted pitch that more-of-the-same FTAs are the ticket to boosting exports. 

But data is not the report’s strong suit. In defending existing deals like the North American Free Trade Agreement (NAFTA) and the Korea FTA so as to advocate for expanding on their model via the TPP and TAFTA, the report simply ignores the deals' track records. For example, on manufacturing, the report states: “to support the growth of advanced manufacturing and associated high-quality jobs here at home, in 2014 the Obama Administration will continue to pursue trade policies aimed at keeping American manufacturers competitive with their global peers.”

But official government data show that our manufacturing trade deficits have increased dramatically under the very trade policies that the administration vows to “continue to pursue.” Last year, we had a $52.4 billion manufacturing trade deficit with our 20 FTA partners. In 1993, before NAFTA was implemented and before 18 of these 20 countries had an FTA with the United States, we had a $30.1 billion manufacturing trade surplus with these same trade partners.  In the intervening 20 years, during which the United States implemented FTAs with all of these countries, the U.S. manufacturing trade balance with these trade partners fell by $82.6 billion. According to the administration’s own figures, that amounts to a loss of more than 446,000 U.S. jobs in manufacturing alone.

When directly addressing NAFTA, the report chooses to ignore one half of the trade flow equation and focus only on exports. It fails to mention that imports from Mexico and Canada under NAFTA have swamped exports, causing the NAFTA trade deficit to soar 556 percent, reaching $177 billion last year.

And while the report claims that “the agricultural sector has been a bright spot for exports,” that has not been the case under recent FTAs. The average annual U.S. agricultural deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million last year, almost three times the pre-NAFTA level. Over the last decade, U.S. food exports to Mexico and Canada actually fell slightly while U.S. food imports from Mexico and Canada more than doubled.

Food exports have fared even worse under the Korea FTA – in the first year of the deal, U.S. beef, pork, and poultry exports to Korea fell by 8 percent, 24 percent, and 41 percent respectively. 

While ignoring the sluggish exports and deep deficits occurring under existing FTAs (“what hole?”), the 2014 Trade Policy Agenda advocates for the TPP by claiming it would deliver where its predecessors have failed. The report states, “TPP will expand U.S. trade with dynamic economies throughout the rapidly growing Asia-Pacific region.” 

Even if one ignores the disappointing export legacy of the deals serving as the TPP’s template, this sales pitch comes across as hollow. The United States already has FTAs with six of the 11 TPP negotiating countries, for which increased market access is largely not up for negotiation. Of the remaining five TPP countries, Japan is the only major economy, and its growth rate last year was a tepid one percent – hardly the sought-after “dynamism.” The remaining four countries include Vietnam (with an annual per capita income of $1,550), Malaysia (with an annual per capita income of $9,820), New Zealand (with a population the size of metro D.C.), and Brunei (with a population the size of Huntsville, Alabama). Are these the markets on which the administration’s history-defying promise of TPP-led export growth hinge? 

Members of Congress aren’t buying it. Most House Democrats and a sizeable bloc of House Republicans have said no to Fast Tracking the TPP. House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid have also voiced their opposition. So has 62% of the U.S. voting public. Their message to the administration is simple: we’re in a hole. Stop asking for shovels. Find a ladder. 

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2013 Trade Data: USITC Corrections of Last Week’s Census Data Show Why Obama’s TPP, Fast Track Quest Is in Trouble

This weekend’s U.S. International Trade Commission (USITC) release of corrected 2013 year-end trade data goes a long way in explaining broad congressional and public opposition to the Obama administration’s trade agenda, which is premised on expanding to additional nations a model of trade pacts that the data show are failing most Americans. The data (graphs below) show:

A stunning decline in U.S. exports to Korea, a rise in imports from Korea, and a widening of the U.S. trade deficit under the Korea Free Trade Agreement (FTA).

  • In 20 out of 21 months since the Korea FTA took effect, U.S. goods exports to Korea have fallen below the average monthly level in the year before the deal.
  • U.S. average monthly exports to Korea since the FTA are 12 percent lower than the pre-FTA monthly average, while monthly imports from Korea are up 3 percent.
  • The monthly trade deficit with Korea has ballooned 49 percent compared to the pre-FTA level. These losses amount to tens of thousands of lost U.S. jobs.

Zero growth in U.S. goods exports relative to 2012, placing the United States decades behind in Obama’s stated goal to double exports in five years.

  • Total U.S. goods exports in 2013 actually dropped slightly from 2012 after adjusting for inflation, revealing a negative 0.1 percent growth rate.
  • The data show there is no chance to meet President Obama’s stated goal to double 2009’s exports by the end of this year. At the paltry 1 percent annual export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054, 40 years behind schedule.

A staggering U.S. trade deficit with Canada and Mexico after 20 years of the North American Free Trade Agreement (NAFTA).

  • The 2013 U.S. goods trade deficit with Mexico and Canada was $177 billion - a nearly seven-fold increase above the pre-NAFTA level, when the United States enjoyed a small trade surplus with Mexico and a modest deficit with Canada.
  • Even worse for U.S. workers, the non-oil NAFTA deficit has multiplied more than 13-fold, costing hundreds of thousands of U.S. jobs. Indeed, the share of the combined U.S. trade deficit with Mexico and Canada that is comprised of oil has declined since NAFTA.

Today’s USITC data correct last week’s Census Bureau trade data to remove re-exports – goods made elsewhere that pass through U.S. ports en route to final destinations. The corrected data only heaps further doubt on Obama’s prospects for getting Fast Track trade authority, now publicly opposed by most House Democrats, a sizeable bloc of House Republicans, and Senate Majority Leader Harry Reid. Obama has asked for Fast Track to push through Congress the Trans-Pacific Partnership (TPP), a controversial deal modeled on the Korea FTA and NAFTA.

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

“Many in Congress and the public oppose NAFTA-on-steroids “trade” agreements like the TPP and Fast Track authority to expedite them because past trade deals have proved to be so damaging. Just like today for TPP, in the past we were sold on glorious projections of these deals’ benefits but the actual data show an ever-larger drop in U.S. exports to Korea since that pact and a growing trade deficit, a massive NAFTA trade deficit and overall zero growth for U.S. goods exports relative to last year despite implementation of more-of-the-same trade deals. The White House and the corporate lobby are trying to sell Congress the TPP and Fast Track with the same old promises about export growth and job creation, but today’s data show that under Obama’s only past major trade deal with Korea on which TPP is modeled, U.S. exports dropped dramatically, imports soared and the U.S. lost more jobs to a trade agreement.”

Korea 2013.

Obama Exports 2013.

NAFTA 2013

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Colombia Uprising: Is This What "Free Trade" Looks Like?

Colombian farmers are dumping tons of oranges onto highways.  Roadways have been blocked throughout the country.  Hundreds of thousands of Colombian protestors are risking rubber bullets and even live ammunition to take to the streets.   

Is this what “free trade” looks like?  Flickr user Marcha Patriótica Independencia 4

Unfair trade is one of the rallying cries of the underreported protests currently wracking Colombia. Protesting groups are asking the Colombian government (among other things) to suspend and renegotiate the U.S.-Colombia “Free Trade” Agreement (FTA).  Thanks largely to the FTA, which took effect in May 2012, highly-subsidized U.S. agricultural products have started to swamp Colombia’s small-scale farmers, contributing to their displacement, the deterioration of livelihoods across Colombia, and the loss of the country’s food security.  

Before the FTA was passed, Colombia’s own Minister of Agriculture predicted a miserable outcome for the country’s farmers. He warned that if the asymmetric deal took effect, Colombian farmers “would have no more than three optionsFlickr user Marcha Patriótica Independencia 2migration to the cities or other countries (especially the United States or bordering countries), leaving to work in drug cultivation zones, or affiliating with illegal armed groups.” Not content to accept any of those three fates, Colombia’s farmers are now making their voices heard. 

For an on-the-ground perspective on the FTA-fed tumult in Colombia, Julia Duranti of Witness for Peace’s team in Colombia offers this guest post:


A Struggle for Survival in Colombia’s Countryside

Julia Duranti, Witness for Peace Colombia International Team

Though you wouldn’t know it from most English-language media or from heads of state, last week tensions in Colombia’s countryside came to a head. But not between the military and armed groups like the FARC, the usual suspects in foreign reporting on Colombia. The source of this uprising lies in policies not up for discussion in the country’s current peace talks: the impact of the U.S.-Colombia FTA – implemented in May 2012 – and policies that have similarly afflicted Colombian campesinos (small-scale farmers).

Flickr user Marcha Patriótica IndependenciaColombia’s campesinos launched the protests – which have overtaken the nation – because they perceive the FTA, and policies like it, to be a threat not just to their production, but their very existence.

The National Grassroots and Agrarian Strike began on August 19 when over 200,000 potato, rice, fruit, coffee, dairy and livestock farmers; miners; truck-drivers; teachers; healthcare workers; and students left their work activities and blocked roadways in 30 key corridors around the country, with the provinces of Boyacá, Valle del Cauca and Nariño being most affected.

The diverse protesters’ list of demands includes suspension and renegotiation of the U.S.-Colombia FTA, financial and political support for agricultural production, access to land, recognition of campesino, indigenous and Afro-descendant territories, the ability to practice small-scale mining, the guarantees of political rights of rural communities, and social investment in rural areas, including in education, healthcare, housing and infrastructure.

Along with roadblocks and marches, in symbolic acts intended to express their inability to earn a living and their frustration at government inertia, dairy farmers in Boyacá poured out over 6,000 liters of milk while citrus farmers in Valle del Cauca dumped 5,000 tons of oranges onto the highway.

Flickr user Marcha Patriótica Independencia 3What could possibly bring farmers to willingly destroy their own products? Campesino livelihoods have been devastated, a process that began with economic liberalization under President Cesár Gaviria in the early 1990’s and continued with a host of Colombian laws that cleared the way for the U.S-Colombia FTA. Then came the FTA itself.  Just over a year old, the deal is already taking its predicted toll on Colombia’s countryside. An FTA-enabled influx of heavily-subsidized U.S. products has contributed to the breakdown of Colombia’s local economies and the displacement of its farmers, fueling the urgency of the current protests.

Despite promises of more jobs and increased exports, the balance after year one of the U.S.-Colombia FTA is dismal for Colombia. According to Colombian paper El Espectador, Colombia’s exports to the U.S. actually fell 4.5% between May 2012 and March 2013, while Colombia’s imports from the U.S. rose 19.7%. In the agroindustrial sector on which many Colombians depend for their livelihood, U.S. imports from Colombia rose 11.5%, but Colombian imports from the U.S. skyrocketed 70%. An economic study conducted prior to the FTA’s passage predicted that just such a scenario would lead to income losses of up to 70% for the vast majority of Colombia’s farmers, contributing to their displacement.   

It is not only that strikers feel they cannot compete with heavily-subsidized U.S. production: they are actually prohibited from doing so. The FTA prohibits the Colombian government from subsidizing agriculture for export or domestic consumption, even as the U.S. government subsidizes U.S. agribusinesses to the tune of $15 billion each year.  

Continue reading "Colombia Uprising: Is This What "Free Trade" Looks Like?" »

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RECAP FROM LIMA: Experts, Activists, and Peruvian Members of Congress Rally Against the TPP

As the 17th round of the Trans-Pacific Partnership (TPP) negotiations continue in Lima this week, objections to the proposed sweeping NAFTA-style deal (with 10 Pacific Rim countries) have been heard from a diverse spectrum of voices, including experts, activists, and even a Peruvian Member of Congress.

BKbSkcoCAAA2P0_.jpg large
Last Thursday, a public forum was held in Lima to discuss concerns about the TPP. Advocates and experts, including Global Trade Watch's own Melinda St. Louis, discussed topics ranging from intellectual property and internet freedom, to labor standards and the investment chapter.

One of the most notable speakers was Pablo Fabian Mosau, a representative from La Oroya, the town that has been severely polluted by a metal smelter owned by U.S.-based Renco/Doe Run (considered one of the ten most polluted sites in the world). Renco/Doe Run has launched an $800 million investor-state claim against Peru using the investment privileges enshrined in the U.S.-Peru FTA –- privileges that the TPP aims to expand. Mosau gave an emotional account of the dire situation in his community, where 99.7% of the children suffer from lead contamination, and flowers and trees have died as a result of the pollution.

The audience also heard from Verónika Mendoza, a Peruvian Member of Congress, who expressed concern about a negotiation process that locks out citizen and government participation. She cited investor-state cases such as Renco/Doe Run and Eli Lilly as indicators that Peru needs to take a strong position to protect environmental health in the face of proposed investment privileges and protect access to medicines in the face of proposed monopoly patent expansions.

On Friday, activists took to the streets to protest the TPP negotiations. Protestors wore masks to symbolize the danger the TPP poses to access to medicines and health and chanted “No es negociable!” (Not negotiable!). The protest was covered by several prominent Latin American news outlets, including CNN, La Pr1mera,  the Associated Press, and many others. La Mula posted a video of the protest.

After the protest, advocates organizing around the TPP negotiations in Lima hosted a webinar to update activists from around the globe and answer questions about the TPP. Click here to check out a video of the webinar if you missed it.

Though the negotiating round in Lima round is coming to an end, many Peruvians -- including the citizens of La Oroya -- still have to live with the damaging effects of the investor privileges embodied in "trade" pacts. Australia has already refused to sign on to such privileges in the TPP.  Hopefully Peru will follow suit. In the meantime, it is crucial that civil society around the globe carry Peruvians' message to their own governments: our right to health, a clean environment, fair labor standards, and internet freedom are not negotiable.

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Bloomberg: "Coup d’Etat to Trade Seen in Billionaire Toxic Lead Fight"

Percy Ramírez - Oxfam America
Percy Ramírez / Oxfam America

Today, Bloomberg published an in-depth piece highlighting the secretive public policy “coup d’etat” that allows corporations to use trade agreements to attack domestic health, environmental, and other public interest policies they feel undermine their ability to make a profit. The use of this "investor-state" system, which was once considered a last resort for companies that had been wronged by countries with weak legal infrastructure, has exploded in recent years as a first-resort way to circumvent strong domestic legal systems. In 2012, corporations used the system to launch a record-breaking 62 new cases against sovereign governments.

Outlined in the article are some of the most egregious cases, including that of Doe-Run/Renco, the company that, after refusing to fulfill its contractual obligations to clean up the pollution of a lead smelter that caused lead poisoning in 99.7% of the community’s children, is now suing Peru under the Peru-U.S. "free trade" agreement (FTA) for $800 million. The story also mentions the record-breaking $1.8 billion judgment that Occidental Petroleum Corp. won against Ecuador last year -- a staggering penalty imposed on Ecuador's taxpayers that amounts to 16% of the country’s external debt.

As the number of investor-state cases balloons, more and more countries are expressing concerns and opting out of investor-state provisions. Despite U.S. pressure, Australia has refused to be a party to the investor-state provisions in the Trans-Pacific Partnership (TPP).  In April, 12 Latin American governments met at a summit focused on investor-state concerns, resulting in a declaration by seven of the governments to coordinate efforts to replace the investor-state regime.  Bolivia and Venezuela have already pulled out of the International Centre for Settlement of Investment Disputes (ICSID), and in March, Ecuador moved to annul its Bilateral Investment Treaty (BIT) with the US.  Other countries such as Brazil, India, and South Africa have either outright rejected the investor-state regime or have made strides to abolish investor-state clauses. Hopefully, these steps forward, combined with increased media attention, will motivate more countries to discard harmful investment provisions that threaten crucial environmental, health, and regulatory policies aimed at improving the lives of the majority.  

Click here to check out the full Bloomberg article.

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Two Years after Obama's Colombia "Labor Action Plan," Death Threats against Unionists Persist Unabated

Grim Reality Contrasts with Obama Administration Promises Made to Promote Passage of U.S.-Colombia Free Trade Agreement

Death threats against Colombian union members have remained appallingly high since announcement of the U.S.-Colombia Free Trade Agreement (FTA) Labor Action Plan according to the Escuela Nacional Sindical (ENS), the group recognized in the Plan as an authoritative source of monitoring data. The data shows that unions and congressional labor rights defenders in Colombia and the United States were sadly correct in opposing the Colombia FTA on concerns of continued violence against workers, while the Obama administration’s promises about the Labor Action Plan were incorrect, said Public Citizen on the two-year anniversary of the Plan.

More than a year after the passage of the Colombia FTA and two years after the Obama administration announced a Labor Action Plan with Colombia to improve its labor rights protections, Colombia remains the world’s deadliest place to be a union member. In the year after the launch of the Labor Action Plan, union members in Colombia received 471 death threats – exactly the same number as the average annual level of death threats in the two years before the Plan, according to the ENS data relied upon under the Plan. At least 20 Colombian unionists were assassinated in 2012 according to ENS data, while the International Trade Union Confederation (ITUC) reported 35 assassinations last year. Meanwhile, many perpetrators of the over 2,000 existing cases of unionist murders remain free.

In addition, violent mass displacements of Colombians increased 83 percent in 2012 relative to 2011, when the U.S. Congress passed the FTA, according to the Consultoría para los Derechos Humanos y el Desplazamiento. The 130 mass displacements of 2012 added to the five million Colombians who have been displaced in the world’s largest internal displacement crisis. Recent acts of horrific violence and forced displacement have occurred in venues targeted for development under the FTA, such as the port of Buenaventura, according to the Washington Office on Latin America.

Jhonsson TorresSadly, Colombian unions and human rights organizations had predicted that the Labor Action Plan would not alter on-the-ground realities. Among the unionists who have received death threats since the FTA went into effect is Jhonsson Torres, a sugar cane worker who came to Washington to plead with members of Congress not to approve the FTA until and unless labor protections improved. One year ago the general secretary of Jhonsson’s union, also under death threat, was shot and killed while walking with his wife.

“Many people were shocked that the Obama administration would push a trade deal with Colombia, given the record of widespread deadly violence against unionists and human rights defenders, some of it perpetrated by the military and most of it occurring with impunity,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Now that the Obama administration is responsible for passing this agreement, the question is: what will it do to reverse this horrible trend?”

During his 2008 presidential campaign, then-candidate Obama famously opposed the Colombian FTA, stating in the third debate with Republican nominee Senator John McCain, “we have to stand for human rights and we have to make sure that violence isn’t being perpetrated against workers who are just trying to organize for their rights.

But in April 2012, as anti-union repression remained rampant in Colombia, President Obama travelled to Cartagena to announce the implementation of the FTA. He stated, “this agreement is a win for our workers and the environment because of the strong protections it has for both – commitments we are going to fulfill.

“The complete flip-flop from the reform trade agenda President Obama campaigned on in 2008 to the retrograde policies the administration is negotiating today with Latin American and Asian nations reveals the deep influence big business has on determining U.S trade policies that affect wide swaths of non-trade related issues,” said Wallach. “Despite members of Congress, labor unions and human rights groups in Colombia and the United States pointing out to the Obama administration the deficiencies in this Plan and the lunacy of implementing the FTA before real improvement could be measured, the sad reality is a failed promise to fix the horrifying daily reality of Colombian workers.”

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Ecuador Moves to Annul U.S.-Ecuador BIT, Denounces Investor-State System

Chevron is using the investor-state system to avoid paying $18.2 billion to residents of the contaminated Lago Agrio region in Ecuador (pictured above).

As global criticism of the investor-state dispute system mounts, Ecuador is taking concrete steps to secede from pacts that enshrine this system, which exposes the country to direct attacks on its public interest policies from foreign investors.  In 2009, Ecuador formally withdrew from the International Centre for Settlement of Investment Disputes (ICSID), an institution which facilitates foreign corporations' legal claims against sovereign governments' policies. On Monday, President Rafael Correa put forth a bill to request that Ecuadorian lawmakers annul Ecuador's Bilateral Investment Treaty (BIT) with the United States, declaring that such treaties “favor foreign investors over human beings.”

The U.S.-Ecuador BIT binds Ecuador to the controversial investor-state system, which uniquely empowers foreign investors to directly challenge a country’s environmental, health, and other public interest laws by claiming that they violate BIT-created investor privileges and threaten “expected future profits.” These cases skirt national court systems and are instead decided by private three-person tribunals composed of arbitrators who bill by the hour. If a corporation wins, taxpayers of the losing country are expected to foot the bill, with no cap on the awarded amount (and even if a country “wins,” they often have to pay exorbitant court fees).

Ecuador has seen some of the most egregious examples of these cases, so it is not surprising that President Correa would want to protect Ecuador’s citizens from further lawsuits.  For instance, after 18 years of persistence, residents of Lago Agrio in the Ecuadorian Amazon won a historic ruling of $18.2 billion dollars against Chevron for the massive contamination of the region between 1964 and 1990 which is alleged to have caused a cancer epidemic and decimated local indigenous groups.  Instead of complying with the Ecuadorian court’s ruling, Chevron has so far made good on its promise of "a lifetime of appellate and collateral litigation" in order to avoid paying out the award.  To evade justice, Chevron launched an investor-state case against Ecuador under the same U.S. BIT that Correa now seeks to annul.  The tribunal in that case ordered the Ecuadorian government last year to interfere in the operations of Ecuador’s independent court system so as to stop enforcement of Chevron's $18.2 billion penalty. 

To add insult to injury, last October Ecuador was slammed with a record $1.8 billion judgment in a case filed by Occidental Petroleum -– the highest amount to ever come out of an ICSID tribunal. The company launched the case against Ecuador under the same U.S. BIT that Correa hopes to annul.  Occidental asked for billions in damages after the company violated a contract with the government, prompting the government to terminate Occidental's investment as contemplated by Ecuadorian law.  To impose a $2.4 billion penalty on Ecuador's taxpayers (including interest and fees), the investor-state tribunal employed astonishing leaps of logic that a dissenting member of the tribunal described as "egregious." 

Ecuador is not alone in its resistance to the harmful investor-state system. As the “egregious” judgments continue to pile up (tribunals have already awarded over $3 billion to foreign corporations under U.S. BITs and free trade agreements, and more than $15 billion is still pending), more countries are denouncing the investor-state system:

  • The Brazilian Parliament has refused to ratify any investor-state agreements.
  • India has made a move to abolish investor-state dispute clauses in Free Trade Agreements (FTAs).
  • South Africa is re-examining its policy on investor-state disputes and has refused to renew BITs with the EU. 
  • Bolivia and Venezuela have also pulled out of ICSID.

Unfortunately, a leaked draft text of the investment chapter tells us that these harmful rules are being replicated and expanded under the Trans-Pacific Partnership (TPP), a NAFTA-style "free trade" agreement currently under negotiation between the U.S. and 10 Pacific Rim nations. Australia, a TPP negotiating Party, has already refused to be subjected to investor-state dispute settlement as part of the deal, and other TPP negotiating Parties have grown increasingly wary of the prospect.  Now more than ever, it is crucial that other countries join the lead of Ecuador, Australia, et al. and refuse to bind themselves to a radical system that puts their environmental quality, public health, and sovereignty at risk.

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Recap from Lima: What Went Down at the Public Forum on the Renco/Doe Run Investor-State Case


Above: Nearly 150 people attend a public forum in Lima on the injustice of the Renco/Doe Run investor-state case.

Last week we traveled to Lima to participate in several events organized to raise awareness about the injustice of Renco’s $800 million investor-state case against Peru. The U.S. company has launched an investor-state attack under the Peru "free trade" agreement (FTA) on behalf of its subsidiary Doe Run, whose metal smelter in Peru has severely polluted the town of La Oroya (declared one of the ten most polluted sites in the world), leaving the inhabitants to suffer from lead poisoning, air pollution, and water contamination. Now, instead of fulfilling its contractual obligation to remediate the damage, Renco/Doe Run is demanding $800 million from Peru – money that would come out of the pockets of the same people who are already suffering from the horrendous pollution.

One of the most powerful events of the week occurred on Thursday when nearly 150 journalists, activists and community members gathered in Lima to attend a public forum to learn more about the implications of the pollution and the investor-state case for the population of La Oroya.

We were livetweeting over at @PCGTW, but in case you missed it, here are some highlights:

+ Our own Melinda St. Louis, Director of International Campaigns, noted that instead of re-thinking the investor-state system based on the situation in La Oroya, Peru is currently negotiating the Trans-Pacific Partnership (TPP), another trade agreement which will expand investor rights according to a leaked draft of the text of the investment chapter.

+Jose de Echave, Director of CooperAcción and previous Deputy Minister of Peru’s Environmental Ministry, explained how the corporation has not fulfilled its contractual obligations, and noted that the U.S.-Peru FTA is not simply about trade – it also has far-reaching social and cultural implications.

+ Matthew Porterfield, Senior Fellow and Adjunct Professor of Law at the Harrison Institute for Public Law at Georgetown University, discussed several alternative solutions to the investor-state system that other countries have already taken, including withdrawing from the International Centre for Settlement of Investment Disputes (ICSID) (a la Bolivia, Ecuador, and Venezuela), withdrawing from investment treaties (a la Ecuador, and possibly South Africa in the near future), or refusing to be a party to the investor-state provisions of the TPP (a la Australia).

+Rosa Amaro, local leader and president of the Movement for the Health of La Oroya (MOSAO),  gave a moving testimony about the dire situation in her community, including the heartbreaking story of the sick children who are seeking justice, the divisions the situation has caused, and the looming lawsuit which would drain the community of the money it has earned from the company, all as a result of breathing “public” air and seeking dignified work. (Those of you who speak Spanish can find part of Rosa’s testimony here).  

The events in Lima may have ended, but Peru and the community of La Oroya continue to find themselves sickened from the pollution and fighting against an unfair $800 million lawsuit. Now it is crucial that the investor-state system not be expanded through the TPP--we have already seen the damage it can do through the eyes of La Oroya.

Below: Panelists from the public forum pose with members of the La Oroya community, which has been contaminated by Renco/Doe Run's metal smelter.


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Live from Lima: Peruvian Press Briefed on Implications of Renco Case and Dangers of TPP


Pictured Above: A press conference is held at the Hotel Melia in Lima on the $800 million investor-state case that the US-based Renco corporation launched against Peru on behalf of its subsidiary Doe Run ; HispanTV Interviews Public Citizen's Melinda St. Louis.

A press conference was held in Lima yesterday in conjunction with the events organized this week to increase awareness about the injustice of Renco’s investor-state case against Peru.

Several major Peruvian news outlets attended and were briefed on the case, including HispanTV, Gestion, El Comercio, and Servindi, among others. Featured experts presented on the dire situation in La Oroya, the implications of corporations' soaring usage of the investor-state system as an avenue to evade justice, and the increased rights that would be granted to such corporations through the TPP.

This morning, articles ran in several of the major newspapers, including Gestión, La República, and La Primera.

Australia has already announced publicly that it will not take part in the investor-state provisions of the TPP.  Will Peru heed the warning of Renco / Doe Run and follow suit?

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PUBLIC FORUM TONIGHT: Starting at 6 PM EST tonight, we will be live-tweeting the Public Forum over at @PCGTW. Community members will be invited to learn more from experts about Renco's investor-state attack and hear from those who have been directly affected by the pollution in La Oroya.

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Live from Lima: Rising Awareness in Peru about the Dangers of Investor-State


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Yesterday, advocates of social justice in Peru kicked off a week of activities designed to increase awareness about the dangers of the investor-state system by highlighting one of the most egregious examples: the case that the U.S.-based Renco corporation has launched against Peru concerning the company's notorious metal smelter. Renco, owned by one of the richest men in the U.S., launched the investor-state attack on behalf of its subsidiary Doe Run, whose Peruvian metal smelter has severely contaminated the town of La Oroya, declared one of the ten most polluted sites in the world.

Several organizations are participating, including Public Citizen and Georgetown University’s Harrison Institute from the United States, along with RedGE, CooperAccion, Red Uniendo Manos Peru and other organizations from Peru. Rosa Amaro, the president of the Movement for Health in La Oroya (MOSAO for its Spanish initials) has also traveled to Lima to speak out on behalf of the citizens of La Oroya. The events organized for this week include a press briefing breakfast, an informational meeting for organizations in Peru, a public forum, and meetings with various government officials.

In case you haven’t been following the situation in Peru closely, the case that Renco has launched against Peru is one of the most outrageous examples of the dangers that the investor-state system poses to public health and the environment. Renco is using the system to try to evade the consequences of the massive pollution that the company has left in La Oroya and to avoid compensating those suffering from lead poisoning, air pollution, and water contamination in the company's wake.

Renco claims that the Peruvian government is attacking the corporation’s investor privileges by not granting it a third extension to comply with its unfulfilled 1997 commitment to install pollution mitigation devices in its smelter. Instead of fulfilling these promises, Renco is suing for $800 million in compensation. For more background, check out the analysis on our website.

Check back for more updates, videos, and photos of the events in Lima as the week progresses.

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Halloween Start for Panama FTA Means Tricks, No Treats for 99% as Panama Makes Top Tax Haven List and Job-Killing FTA Deficits Rise

Despite Talk of Closing Budget Deficit, Obama and Romney Support Deal That Limits U.S. Tools to Counter Tax Dodging by U.S. Firms and Wealthy Individuals

WASHINGTON, D.C. – The biggest scare of Halloween 2012 is the implementation of the Panama Free Trade Agreement (FTA), which weakens the U.S. government’s ability to stop U.S. corporations and wealthy individuals from dodging taxes in Panama, one of the world’s most notorious tax havens. Passed in October 2011, the FTA is scheduled to go into effect on Wednesday.

Panama’s tiny $30 billion economy—smaller than that of Columbia, S.C.—offers few U.S. export opportunities. And many of the prospective U.S. business opportunities associated with the Panama Canal widening project were carved out of the agreement’s coverage. But the downsides of the deal are huge: As the U.S. government struggles to close its budget deficit, the pact restricts U.S. policies now available to counter tax evasion by U.S. firms and wealthy individuals who move their money to Panama. The pact also empowers firms incorporated in Panama, including offshored U.S. corporations, to use international tribunals to demand U.S. taxpayer compensation over U.S. policies, such as anti-tax-evasion measures, that the firms claim undermine their “reasonable expectations.”

“The presidential candidates are sparring over who would best crack down on offshore tax evasion and reduce our budget deficit, so it’s a sorry statement about the power of corporate campaign money that both candidates support a pact with the hemisphere’s leading tax haven,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Deficit-cutting promises run completely contrary to this deal, which will limit the incoming administration’s ability to make U.S. corporations and wealthy individuals pay their taxes.”

In June 2012, the Organization for Economic Cooperation and Development (OECD), which tracks countries’ tax haven statuses, reported that Panama remains one of a handful of countries in the world that has not passed a first-stage review of its tax transparency measures. The OECD noted Panama’s nearly unparalleled nonconformity on six of nine regulatory checks against tax evasion. Even the Cayman Islands did not earn that dubious distinction.

A 2010 U.S. Tax Information Exchange Agreement with Panama, touted by the Obama administration as significantly improving Panamanian tax evasion problems, has failed to deter banking secrecy on the ground in Panama, as the recent OECD report highlighted. A large loophole in the tax treaty allows Panama to deny tax information requests about U.S. firms and citizens if revealing the information is “contrary to the public policy” of Panama, a country that earns much of its revenue by providing tax haven services.

Congress passed the Panama FTA despite opposition from two out of three House Democrats and despite U.S. public opinion polling that revealed FTA opposition as the dominant position of Democrats and Republicans alike. Since then, the U.S. government has pressured Panama to provide large U.S. pharmaceutical firms with new monopoly patent protections that increase medicine prices. Panama, however, was not required to alter its banking secrecy practices or to change its two-track tax system, which provides tax-free status to foreign corporations, nor to eliminate tax-evasion tools such as bearer share corporations, which are owned by whomever physically controls paper shares with no recording of ownership transfers required.

Panama is home to more than 400,000 corporations, many of them U.S. subsidiaries, which amounts to one corporation for every nine Panamanians. The FTA’s extreme investment and financial services provisions bar the U.S. government from limiting U.S. corporations’ transactions with Panama-based subsidiaries, while granting the subsidiaries the right to directly challenge the U.S. government in foreign tribunals for U.S. regulations to rein in tax evasion. 

FTAs with Korea and Colombia were passed on the same day as the Panama pact in 2011. Since those deals went into effect, U.S. exports to Korea have declined and imports from both Korea and Colombia have surged, increasing the job-killing U.S. trade deficit.

The Obama administration’s claim that the Panama FTA “supports the President’s goal of doubling of U.S. exports to support well-paying jobs at home” repeats an identical claim made during the launch of the Korea FTA. Under that parallel deal, U.S. goods exports to Korea have fallen by more than $1.2 billion while imports have risen in comparison to 2011 levels for the same period. As a result, the U.S.-Korea trade deficit has soared by 34 percent, costing thousands of U.S. jobs. Both the Korea and Panama FTAs include provisions, borrowed from the North American Free Trade Agreement (NAFTA), that incentivize offshoring of investment. In addition to limiting how U.S. officials may combat tax dodging by U.S. firms in Panama, the FTA grants special benefits to U.S. corporations that incorporate in Panama. These offshoring incentives include a guaranteed minimum standard of treatment, compensation for regulatory costs and the ability to sue the Panamanian government in foreign tribunals if it enacts policies that undermine foreign firms’ expected future profits.

For more information about the Panama FTA, visit http://citizen.org/panama-fta.


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Tribunal Slams Ecuador with Largest Ever Investor-State Penalty

We were astounded to learn earlier this month that a three-person ICSID tribunal has imposed on Ecuador a $1.8 billion judgment, the largest investor-state award to ever come out of the private forum.  Having had a chance to look at the sovereignty-defying leaps of logic that the tribunal used to determine that Ecuador should pay the mammoth sum to U.S.-based Occidental Petroleum (Oxy), we’re even more appalled. 

Oxy launched the case against Ecuador under the U.S.-Ecuador Bilateral Investment Treaty (BIT).  Last week, we reported that Chevron is attempting to use this same NAFTA-style treaty to evade an $18.2 billion ruling for decades of pollution in Ecuador’s Amazon.  While the second-largest U.S. oil corporation (Chevron) is using the BIT’s extreme investor-state system to run from billions in damages inflicted upon Ecuador, the fifth-largest U.S. oil corporation has just employed the same system to extract nearly two billion from the country.  It seems that Big Oil has chosen private investor-state tribunals as the preferred arena in which to attack Ecuador as its preferred punching bag. 

In addition to awarding $1.8 billion of Ecuador’s tax dollars to Oxy as the principal amount, the tribunal in Oxy v. Ecuador  ordered Ecuador to pay $589 million in backdated compound interest, plus post-award interest and half of the costs incurred by the tribunal itself (para. 876).  In sum, the tribunal handed Ecuador a penalty of at least $2.4 billion.  What does $2.4 billion mean to Ecuador?  That amounts to 16% of the country’s external debt and 11% of all goods exported in one year.  In more human terms, the financial drain is equivalent to the combined annual income of the poorest 20% of Ecuadoreans--nearly 3 million people.  Even at the average income level, the tribunal’s penalty amounts to the total income of a share of the country that’s equivalent, in U.S. terms, to the combined populations of New York and Los Angeles.  Of course, it’s the Ecuadorean government who will have to figure out how to finance the $2.4 billion, which is the same amount that it spends on health care each year for over seven million Ecuadoreans-- almost half the population. 

What events could have prompted such a massive judgment?  In May 1999, Oxy signed a 20-year contract with Ecuador and the state oil company to explore for oil in Block 15, a segment of Ecuador’s Amazon, and extract from any discovered reserves (paras. 112, 115).  In exchange for taking on all expenses, Oxy was contractually entitled to 70% of the oil produced, with Ecuador maintaining a right to the rest (para. 117).  The contract also stipulated that while Oxy could sell the oil, it could not sell off any portion of its rights to produce and profit from the oil without government authorization.  The contract stated that transferring the rights to the oil production without authorization “shall terminate” the contract, meaning legal annulment and forfeiture of investments (para. 119).  This provision explicitly enforced Ecuador’s hydrocarbons law, which protected the government’s ability to vet companies seeking to gain control over oil production in its territory, a particular concern in the Chevron-ravaged Amazon region (para. 121). 

One year after signing the contract, Oxy sought to sell off a portion of its investment in Block 15 oil production so as to gain capital and reduce expenditure risks.  In October of 2000, it signed with the Alberta Energy Company (AEC, a Canadian firm) a contract in which Oxy kept “nominal legal title” to the oil production contract with the government, but AEC purchased 40% of Oxy’s oil rights and agreed to foot 40% of ongoing costs (paras. 128, 129).   The two companies formed a “Management Committee” comprised of one AEC representative and one Oxy representative with the “power and duty to authorize and supervise Joint Operations” (para 136).  Oxy mentioned the deal to the government, but neither presented the contract nor sought government authorization for AEC’s acquisition of a significant economic and operational stake in the Amazonian oil project (paras. 147-160). 

After an audit of Oxy in 2004, Ecuador’s Attorney General determined that the confidential Oxy-AEC contract in 2000 had bypassed necessary government authorization and thus violated Oxy’s contract with the government, prompting him to initiate a process to annul it (para. 177).  In May 2006, after a long delay filled with a presidential ouster and political tumult, the government terminated the contract with Oxy and repossessed the land and oil equipment of Block 15 (paras. 199, 200). 

How did the tribunal, reviewing this evidence, determine that Ecuador should pay Oxy the largest ICSID tribunal-decided sum in history?  With 326 pages of logical gymnastics.  The tribunal found that Ecuador had violated its BIT obligation to provide Oxy with “fair and equitable treatment,” the single most successful investor claim in the NAFTA-style investor-state system.  To get there, the tribunal’s arguments took numerous turns, often defying Ecuador’s sovereignty, common sense, or both.  I summarize below five of the most troubling arguments, presented in reduced arithmetic form to underscore the tribunal’s “logic.”


Continue reading "Tribunal Slams Ecuador with Largest Ever Investor-State Penalty" »

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U.S. Supreme Court Refuses to Hear Chevron's Case to Block $18.2 Billion Penalty for Amazon Pollution

In the most recent development in the historic case against Chevron’s appalling pollution in the Amazon, the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling last week.  In so doing, the Supreme Court produced yet another denial of the company’s attempt to block an $18.2 billion dollar judgment against the company in Ecuador. Chevron is trying to avoid paying the judgment that resulted from a successful lawsuit filed in Ecuador by residents of Lago Agrio in the Ecuadorian Amazon for massive contamination of the region between 1964 and 1992.

Earlier this year, the U.S. Second Circuit Court of Appeals threw out a ruling by a federal judge in New York, which had temporarily blocked enforcement of the judgment.  The appellate court asserted that U.S. law does not permit “disappointed litigants in foreign cases” to ask the court to “restrain efforts to enforce those foreign judgments against them, or to preempt the courts of other countries from making their own decisions about the enforceability of such judgments.”  The appellate court chastised the lower court’s attempt to block the Ecuadorean judgment, saying the move “risks disrespecting the legal system” of Ecuador and wrongly presumes that a U.S. court can act as “the definitive international arbiter of the fairness and integrity of the world’s legal systems.”  The U.S. Supreme Court’s decision to not hear Chevron’s appeal suggests that they did not see a compelling reason to question the appellate court’s reasoning.  

Despite having lost on the merits in the highest courts in Ecuador, and having been continually thwarted by U.S. courts in its attempts to halt enforcement, Chevron is not finished with its threat of a “lifetime of appellate and collateral litigation” to avoid complying with the judgment. The company is using the extreme foreign investor rights in the U.S.-Ecuador Bilateral Investment Treaty (BIT) to continue its campaign to evade justice via an "investor-state" case to be decided by an ad hoc tribunal of three private lawyers.

This is not the only instance of corporations using international trade and investment pacts to bypass the justice system of sovereign nations. In August, the Australian High Court (equivalent to the U.S. Supreme Court) upheld the country’s landmark “plain packaging” laws against an attack from Big Tobacco. Despite this, Australia’s landmark tobacco control law remains under threat as Big Tobacco company Philip Morris is challenging the law under the Hong Kong-Australia BIT. The U.S. company incorporated a subsidiary in Hong Kong in order to launch the attack.

The details of the cases are different - the Australian High Court ruled to uphold its law on the merits of the case, while the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling.  However, in both instances, deep-pocketed corporations are using trade and investment pacts to bypass and belittle the highest courts, even in countries with highly respected and independent judiciaries.

Under the investor-state dispute settlement system enshrined in U.S. Free Trade Agreements (FTAs) and BITs, private tribunals have awarded more than $2.5 billion in taxpayer compensation to corporations to compensate them for “lost profits.”  Despite such damage, these same rules are being expanded through the Trans-Pacific Partnership (TPP). A leaked investment chapter from the TPP reveals that the pact would require all TPP countries, including the United States, to allow foreign investors to launch investor-state attacks on their governments, to be decided by unaccountable foreign tribunals. Understandably, Australia has so far refused to be subjected to the investor-state dispute settlement in the TPP, but the U.S. is still pushing TPP negotiating countries to put investor "rights" before their own public interests.

The conclusion of the Chevron case is being closely monitored, and will have consequences beyond Lago Agrio. Reuters reports that “oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate.” If Chevron is successful in its attempts to avoid paying damages for egregious pollution, other companies will have affirmation that they have a chance to circumvent responsibility for environmental destruction by using the extreme investor-state system. 

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Al Jazeera Asks: Will Colombia's Protesting Workers Be Heard?

This week, as we mark 100 days since the implementation of the Colombia-U.S. Free Trade Agreement, volatile protests against General Motors indicate that working conditions have not improved for Colombian workers. Colombia remains the most dangerous place in the world for union organizers, and seven union leaders have been killed this year.

Watch Al-Jazeera's video on the GM workers, who have stictched their mouths shut in a hunger strike, here.


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Leaked TPP Chapter Sparks Outrage

The Trans-Pacific Partnership (TPP) Investment Chapter that leaked last week has been making waves. Trade scholars, talking heads, citizens and politicians are all discussing the ramifications of this chapter, which outlines the process that multinational corporations can use to sue governments that enact laws to protect public health, workers’ rights, and the environment.

The leak of this secretive chapter has amplified the voices of bipartisan congressmen and numerous civil society organizations who have long been demanding transparency in the TPP negotiations. Huffington Post ran an article which opened on the front page and has drawn a record number of reader comments- 29,959 to date. The text of the article cites the list of calamitous effects the TPP Investment Chapter could have, including raising the cost of vital medicines and effectively ending “Buy American” preferences for domestic manufacturers. Global Trade Watch Director Lori Wallach warned that "the outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of [trade] negotiations."

The progressive online magazine Salon ran a story warning its readers that TPP could grow “bigger than NAFTA.” Other articles have also appeared in a variety of domestic and international outlets, including RT (which also interviewed our own Todd Tucker), Inside US Trade, The New Zealand Herald, Law360, the Santiago Times and the International Economic Law and Policy Blog, among others.

Wallach has also discussed the leak on numerous radio and television programs. On the news show “Democracy Now,” Lori spoke with Amy Goodman and Juan González about the dangers of TPP as “a 'one-percenter' power tool that could rip up our basic needs and rights." She also appeared on numerous other TV and radio outlets, including the Viewpoint with Elliot Spitzer on CurrentTV, Let’s Talk About It Radio, Pacifica Radio, CounterSpin, the Dave Sirota Show, the Nicole Sandler Show, Stand UP! With Pete and Dominic, the Bill Press Show, and Sly in the Morning.

The leak has incited extremely significant dialogue, especially in Australia, which according to the leaked document would be the only TPP nation exempt from the Chapter’s provisions on investor-state tribunals.

Providing the public with access to the TPP Investment Chapter is a significant beginning step towards unearthing the secrets of the TPP negotiations and promoting awareness of the powers it bestows upon corporations at the expense of the citizens of America and the eight other TPP nations. (Or eleven, if you include this week's announcements that Canada and Mexico would join the talks.) The more exposure this document receives, the more pressure can be put upon negotiators to live up their promises of transparency.

Thanks to Jed Silver for contributing to this post.

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TPP could undermine Medicare, Medicaid and Veterans’ Health - hurting seniors, military families and the poor

You've read about how the leaked chapter of the Trans-Pacific Partnership (TPP) that surfaced yesterday will outsource our judicial system and allow corporations to attack our laws.

But did you know that an earlier leaked text shows that the TPP could also undermine Medicare, Medicaid and Veterans' Health? This could hurt access to affordable medicines for our seniors, military families, and poor.

Indeed, it has been an open secret among trade negotiators that U.S. pharmaceutical companies have pushed to limit drug price containment measures, such as through the recent bilateral trade deals with Korea and Australia.

But, in our new public interest analysis, Public Citizen shows that Medicaid, Medicare, the Department of Defense’s TRICARE program for active military personnel, and the Veterans Health Administration and the 340B program are all threatened by the TPP.

We also show how proposed changes to Medicare championed by President Obama would clearly risk violating the TPP. Throughout, we show how trade tribunals are less likely to defer to national healthcare regulators than do national judges, including conservatives like Justices Scalia and Thomas. We conclude with suggested changes to the TPP to insulate smart drug price containment strategies.

Read the full memo here.

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Controversial Trade Pact Text Leaked, Shows U.S. Trade Officials Have Agreed to Terms That Undermine Obama Domestic Agenda


After Two Years of Closed-Door Negotiations, Trans-Pacific Partnership Text Replicates Alarming Bush Trade Pact Terms That Obama Opposed as Candidate, and Worse

WASHINGTON, D.C.– A leak today of one of the most controversial chapters of the Trans-Pacific Partnership (TPP) reveals that extreme provisions have been agreed to by U.S. officials, providing a stark warning about the dangers of “trade” negotiations occurring under conditions of extreme secrecy without press, public or policymaker oversight, Public Citizen said.

 “The outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of TPP negotiations,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade and in a move that will infuriate left and right alike have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do.”  

Although the TPP has been branded a “trade” agreement, the leaked text of the pact’s Investment Chapter shows that the TPP would:

  • limit how U.S. federal and state officials could regulate foreign firms operating within U.S.  boundaries, with requirements to provide them greater rights than domestic firms;
  • extend the incentives for U.S. firms to offshore investment and jobs to lower-wage countries;
  • establish a two-track legal system that gives foreign firms new rights to skirt U.S. courts and laws, directly sue the U.S. government before foreign tribunals and demand compensation for financial, health, environmental, land use and other laws they claim undermine their TPP privileges; and
  • allow foreign firms to demand compensation for the costs of complying with U.S. financial or environmental regulations that apply equally to domestic and foreign firms. 

While 600 official U.S. corporate advisors have access to TPP texts and have a special role in advising U.S. negotiators, for the public, press and policymakers, this leak provides the first access to one of the prospective TPP’s most controversial chapters. In May, U.S. Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee’s Subcommittee on International Trade, Customs and Global Competitiveness – the committee with jurisdiction over the TPP – filed legislation to open the process after he and his staff were denied access to even the U.S. proposals for the TPP negotiations. 

Last month, U.S. Trade Representative Ron Kirk defended the unprecedented secrecy of TPP negotiations by noting that when the draft of a major regional trade pact was released previously, it became impossible to finish the deal as then proposed. 

“The top U.S. trade official effectively has said that the administration must keep TPP secret because otherwise it won’t be able to shove this deal past the public and Congress,” said Wallach. “The airing of this one TPP chapter, which greatly favors foreign corporations over domestic businesses and the public interest and exposes us to significant financial liabilities, shows that the whole draft text must be released immediately so it can be reviewed and debated. Absent that, these negotiations must be ended now.” 

The TPP is the first trade pact the Obama administration is negotiating. Today’s leak further complicates the administration’s goal of completing TPP negotiations this fall. Already the TPP timeline was generating political headaches for the Obama re-election campaign, as repeated U.S polling shows that majorities of Democrats, Independents and GOP oppose more NAFTA-style trade deals. 

The TPP may well be the last trade agreement that the U.S. negotiates. This is because TPP, if completed, would have a new feature relative to past U.S. trade pacts: It would remain open for any other country to join later. Last month, USTR Kirk said that he "would love nothing more" than to have China join TPP.

The TPP offered an opportunity to develop a new model of trade agreement that could deliver the benefits of expanded trade without unduly undermining signatory nations’ domestic public interest policies or establishing special privileges for foreign corporations. President Barack Obama and countless members of Congress campaigned on fixing these investment rules to better protect the public interest. But Public Citizen’s analysis of this text shows that the U.S. positions do not reflect any of the changes that candidate Obama pledged when he recognized the threats posed by the NAFTA-style investment provisions in trade agreements. 

The leak also reveals that:

  • Australia has refused to submit to the jurisdiction of the “investor-state” private corporate enforcement foreign tribunal system;
  • U.S. negotiators are alone in seeking to expand this extra-judicial enforcement system to allow the use of foreign tribunals to enforce contracts that foreign investors may have with a government for government procurement or to operate utilities contracts and even related to concessions for natural resources on federal lands;
  • Other countries are proposing safeguards for financial regulation and limits to the corporate tribunals that the U.S. has not supported.

 Public Citizen’s analysis of the leaked text and guided tour through its provisions can be found here.


BREAKING: For an analysis of these developments by Zach Carter of The Huffington Post, click here.

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Implementation of Colombia Trade Deal a New Low for Workers and the Environment

It is oddly fitting that U.S. Trade Representative (USTR) Ron Kirk would celebrate today’s implementation of the U.S.-Colombia trade deal at the U.S. Chamber of Commerce. After all, even as the U.S. government’s own projections showed that this pact and a similar one with Korea would increase the U.S. trade deficit, both USTR and the Chamber worked overtime to misrepresent this and other likely impacts.
At a time when nearly four out of ten Americans are unemployed or simply not participating in the labor force, it is unconscionable to implement a trade deal with Colombia – the unionist murder capital of the world.  At a time when multinational mining and other extractive industries are displacing poor Colombians, it is unthinkable for this pact to privilege these same corporations with special rights to challenge Colombia’s social and environmental mitigation policies in supranational tribunals. The Colombian government’s own pre-pact assessment anticipated the likely consequence of this deal: rural Colombians “would have no more than three options: migration to the cities or to other countries (especially the United States), working in drug cultivation zones, or affiliating with illegal armed groups.''

The failed North American Free Trade Agreement has virtually identical rules as the Colombia pact, and we know how that worked out: increased job insecurity and more corporate attacks on public interest policies outside of national judicial systems. These rules weren’t a good idea when it came to Mexico: they’re even worse when it comes to Colombia.

In October, President Obama set a new low by pushing a controversial U.S.-Colombia trade deal that attracted the highest level of Democratic opposition to a Democratic president’s trade initiative in history. Instead, record high levels of Republican support were marshaled, only because the Tea Party-supported members of Congress flip-flopped on their campaign commitments by voting for a trade deal that undermines American jobs and sovereignty.

If the administration continues the course on the failed trade policies of the Bush-Clinton-Bush years (as it seems to be with the nine-nation Trans-Pacific Partnership), it can expect continued outrage from people across the political spectrum.

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Illegal log trade flourishes under U.S.-Peru trade deal

Our colleagues over at the Environmental Investigation Agency have just published a comprehensive study in the trade in illegal logging certificates in Peru in the years since the US-Peru FTA was signed. As they write:

By crossing public information on (a) the “supervision” inspections conducted by the Supervisory Body for Forest Resources and Wildlife (OSINFOR for its Spanish initials) on a series of timber concessions with (b) the documentation for CITES export permits for cedar and mahogany, EIA identified more than 100 shipments containing illegally logged CITES wood that were exported to the US between January 2008 and May 2010 – that is, more than 35% of all such shipments with CITES permits that left Peru for the US during this period.

Peru’s primary exporter, Maderera Bozovich, exported shipments under 152 CITES permits during this time, at least 45% of which included wood of illegal origin. It is likely that more supervisions in the field would discover that these percentages are actually higher.

The FTA contained a new Annex on Forest Sector Governance, which was put in place because Peru was (at the time of negotiations on the deal) one of the world's primary sources of cedar, mahogany and other endangered species. (Longtime Eyes on Trade readers will recall that the forestry annex was a major reason cited by key Democrats for their support of an otherwise fundamentally flawed trade deal, back when a minority of Democrats joined with a majority of Republicans to pass the deal back in 2007.) A provision of the annex reads that Peru is obligated to:

"Provide criminal and civil liability at adequate deterrent levels for actions that impede or undermine the sustainable management of Peru’s forest resources. Such actions shall include:

(i) Threats or violence against, or other intimidation of, government personnel engaged in enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products;
(ii) Knowingly creating, using, presenting or providing false information on any material document relating to enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products, including forest management plans, annual operating plans, applications for permits/concessions, and transportation documents;
(iii) Obstructing an investigation, verification, or audit conducted by government personnel engaged in enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products;
(iv) Knowingly harvesting or purchasing timber or timber products from areas or persons not authorized under Peruvian law; or knowingly transporting timber or timber products taken from areas or persons not authorized under Peruvian law; and
(v) Providing to a government official, or receiving as a government official, compensation, whether monetary or in kind, in exchange for particular action taken in the course of that official’s enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products."

While there is no statistical evidence that trade in endangered timber has increased, or that deforestation has increased, EIA is concerned (as I understand it) that the lack of accountability represented by the forged documents that do not line up to the actual origin of the trees sold and exported from 2008-10 could be an indication of deeper forestry abuses beneath the statistical surface or down the line. They're calling on the Obama administration to audit Peru's forestry practices, as a first step that could lead to actual retaliation under the FTA.

The FTA has been a fundamentally disruptive force in Peruvian life, disrupting presidential elections and now offering U.S. multinationals with tools to evade justice and environmental clean-up responsibilities. See this excellent report by the Sunlight Foundation's Keenan Steiner for more on this latter point, which makes mention of our March 2012 report on a recent so-called investor-state case under the U.S.-Peru FTA. The Obama administration is set to lock in and expand these rules under the Trans-Pacific Partnership trade deal, which both Peru and the US are in and which is also supported by presumptive GOP candidate Mitt Romney.

The significance of the EIA reports (you can check out EIA's 2010 study on the same topic) is that the best part of the FTA (the forestry sector annex) is delivering more information and attention to forestry, but has not yet led to fundamental change on the ground. To deliver that change, we'll have to see actual enforcement. Now, the ball's in Obama's (or Romney's) court. Will they deliver?

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Senator Wyden files amendment for more transparency in the TPP negotiations

A couple of weeks ago we reported about Senator Wyden's lively exchange with U.S. Trade Representative Ron Kirk regarding transparency in the Trans-Pacific Partnership Free Trade Agreement (TPP).

Senator Wyden has now increased pressure on USTR by filing a legislative amendment for more transparency in the TPP negotiations related to intellectual property and the internet. Our colleagues at KEI posted a short blog about the amendment.

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Choking on sugarcoating

Last night, the Office of the U.S. Trade Representative (USTR) released its hefty, annual Trade Policy Agenda and Annual Report. This statutorily mandated annual tome offers a good opportunity for Congress and the public to understand what USTR thinks it's doing, or what the agency wants us to think it's doing.

Unfortunately, the Trade Policy Agenda is (once again) an exercise in sugar-coating so extreme that it's surprising it got past Michelle Obama's nutrition advisers.

We've detailed how, after some initial honesty in the 2009 Trade Policy Agenda, USTR by President Obama's second year was back to the same old Bush administration rhetoric on trade policy. The 2012 agenda is in that latter vein as well. Here are just some of the flaws in the latest report:

Trade without a net (calculation). As we've detailed on this blog many times over (see here and here), one of the administration's biggest sins in its recent push for the Korea and Colombia trade deals was its claim that these deals would boost bilateral exports by $12 billion, without noting that the government's own numbers project that the deals will increase job-displacing imports more than job-creating exports. In other words, these deals are projected to be a net negative for job creating exports. We were kinda hoping that the administration might stop misrepresenting its own research once they got Congress to pass these deals. But this seems to be a case of repeating the same incorrect line so many times that you start to believe it's true.

American-made smoke and mirrors. The very first page of the Trade Agenda mentions the "Made in America" theme twice. But USTR is actually pushing the exact opposite of Made in America. Not only have our trade deals meant that imports of products Made-Overseas swamp exports of products Made-in-America, but these pacts also require that the U.S. roll back Buy American requirements for our trading partners. In fact, today, the morning after the Trade Agenda touting Made in America was published, USTR issued a determination stating that Korean-made products will be treated as if they were American for U.S. government procurement purposes.

Korea deal hurts U.S. auto sector. Everyone loves to love on the auto sector these days, and the Trade Agenda paints the Korea deal as a boon to Detroit. But once again, the government's actual numbers show that Korean auto imports will outstrip U.S. auto exports under the deal. Moreover, the harebrained (and high profile in Korea) exemption of U.S. autos from having to meet Korean auto safety and environmental standards will read like a "Do Not Buy American cars for your teen" label to every concerned Korean mother and father.

No mention of significant WTO attacks. The Trade Agenda also celebrates U.S. participation in the World Trade Organization (WTO) in 2011, but fails to mention the most important news: the U.S. lost not one, not two, but three high-profile WTO attacks on U.S. consumer protection policies. As the majority of WTO members cheered from the sidelines, three panels of nine unelected foreign "judges" ruled that U.S. efforts to reduce teen smoking and inform consumers about the origin of meats and the impact of tuna fishing on dolphins violate WTO rules. These three rulings were the first ever under controversial terms of the WTO's Agreement on Technical Barriers to Trade, and could open the U.S. up to trade sanctions. (Now, if you bother to look through the full 393 pages of the extended Annual Report, these disputes are mentioned, albeit with insufficient detail or balance to develop an informed view.)

Working hard to export less. Significant USTR resources are being expended on the Trans-Pacific Partnership (TPP). The Trade Agenda touts U.S. exports to the eight TPP nations (supposedly to point out how awesome the deal will be for U.S. exports), but fails to mention that USTR already put FTAs in place with the four most significant nations on the list (Peru, Chile, Singapore and Australia). Oops.

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Non-Compliance in Investor-state proceedings

There were some interesting press hits over the weekend from Reuters' Alison Frankel, Adam Klasfeld, and AFP about the recent investor-state arbitral ruling against Ecuador.

(The award for Chevron was made by Horacio Grigera Naón (of American University, nominated by Chevron); Vaughan Lowe (of Oxford University, nominated by Ecuador); and V.V. Veeder ("one of the stars" of investment arbitration from the UK's Essex Court Chambers, appointed by the other two).)

Alison writes:

Lori Wallach of Public Citizen's Global Trade Watch told me that Ecuador should not comply with the panel's most recent order. (Wallach went to law school with Steven Donziger, the architect of the Ecuadorean plaintiffs' case, but is not a paid consultant for the plaintiffs.) Wallach agreed that countries regularly ignore orders from private arbitrators, whom she derided as "three private lawyers in a hotel room." She said that the directive from the Chevron panel, however, is "the most outlandish one I've seen." It's unprecedented for a panel to order an injunction that calls for an executive to interfere with a domestic court system, she said. "It would be as if one of these panels ordered Obama to act contrary to the Supreme Court," said Wallach, who has been tracking international arbitration since 1994. "Ecuador shouldn't follow it." (Public Citizen put out a press release Friday asserting that the Chevron panel's "obscene" award "could lead to the implosion of the entire investor-state system, which international companies are increasingly using to try to evade justice worldwide.")

Chevron counsel Randy Mastro of Gibson, Dunn & Crutcher said suggestions that the Republic should ignore the arbitrators' instruction are absurd. "Any country ignoring the ruling of an arbitration panel would be doing so at its peril," he said. Chevron's underlying claim in this arbitration, he pointed out, is for a judgment that under an old agreement with Chevron predecessor Texaco, the Republic of Ecuador is responsible for bearing all the costs associated with cleanup of the Lago Agrio region -- including Chevron's liability to the Ecuadorean plaintiffs. With that part of the arbitration pending, the Republic would be risking an adverse result if it flouted the panel's interim order.

"Typically, nations with treaty obligations honor those obligations or face the consequences," Mastro said.

This raises an interesting question, which a colleague asked me: “Are there any penalties written in the treaty if Ecuador disobeys the ruling?"

The US-Ecuador bilateral investment treaty says: “Any arbitral award rendered pursuant to this Article shall be final and binding on the parties to the dispute. Each Party undertakes to carry out without delay the provisions of any such award and to provide in its territory for its enforcement.”

What if a country refuses to see itself as bound? What then?

Well, the BIT also says that all arbitrations “shall be held in a state that is a party to the New York Convention.” This creates a backdoor enforcement regime. When an arbitral tribunal orders a cash payment, a claimant can take the arbitral award to the national court of any signatory to the New York Convention (1958). This is about every country

Supposedly in all of these countries (but definitely in the developed countries), a national court will almost always agree to simply enforce the award, and they can order that the assets of the complainant or respondent (as needed) that may exist within national territory be impounded in order to make the payment. (Virtually every government has bank accounts or other assets in the US, UK and Switzerland, which is where most of these arbitral award enforcement actions occur.)

The situation is considerably murkier in the Chevron case, and there are not many (if any) precedents for non-cash related awards.

Chevron's counsel argues that Ecuador risks an adverse ruling in the "final award" if it flounts the interim measures award. (Interestingly, Veeder, Lowe and Grigera Naon have not even found that they have jurisdiction over the case, but assumed they did for the sake of making this injunction-like interim award.) I see a few problems with that argument. First, it's possible that there could never be a "final award." Second, if Ecuador already denounced the interim award, what would keep them from denouncing the final award?

Here's where we get to brass tacks, all extra-legal, so to speak:

  1. Chevron could argue that capital will dry up. This argument states that capital markets would refuse to lend to a country that didn’t “play by the rules.” Indeed, Argentina has had difficulty accessing international capital markets since its default and subsequent refusal to enter bond markets. However, this has not mattered since Argentina has strong internal capital markets, export markets and has been growing like gangbusters. My bet is that Ecuador (certainly under Correa) would not find this threat super credible either, although it could definitely make the government's life uncomfortable.
  2. Chevron could pressure U.S. to take foreign policy action. More recently, Obama has tried to pressure Argentina to comply with investor state rulings by voting against disbursements for Argentina in the Inter-American Development Bank. Congress may attach riders to appropriations for Argentina to pressure them to comply. This could hurt Ecuador, but the country also has been on the outs in trade preference legislation already.
  3. Chevron could press for war. In an earlier era of gunboat diplomacy, countries that didn’t “play by the rules” received a visit from the US or UK Armed Forces.

Although some of these sound absurd, they are options for "enforcing international law."

Now, Ecuador could attempt to launch a state-to-state dispute over the interpretation of the BIT. In fact, they’ve already done this in the earlier investor-state case brought by Chevron. (In that underlying case, Ecuador was ordered to pay Chevron around $100 million, essentially because Chevron argued that the Ecuadoran courts were moving too slow in hearing the case brought by indigenous people against the oil giant. Now, Chevron is essentially arguing that Ecuador is moving too fast, and they need international intervention.)

Since we don't know how that case will end up, it's hard to know how a second one could end up in Chevron v. Ecuador Part Deux, nor what if any consequence it could have on an adverse investor-state ruling. But it seems things will stay interesting in this case for a while to come.

UPDATE: Bottom line: Ecuador is stuck between a rock and a hard place. If the government complies with the investor-state ruling and therefore breaks its own Constitution, it risks revolution at home. If it ignores the investor-state ruling, it allows Chevron to continue its global campaign to isolate Ecuador in international capital markets and politics. Chevron would probably ultimately try to enforce a cash arbitral award in third country courts. I'm betting that the plaintiffs would, in this case, also try to enforce the Ecuadoran court ruling in third country courts. Essentially, compliance puts Ecuador on a constitutionally tainted collision course with its citizenry; non-compliance puts the investor-state system on a geopolitically tainted collision course with justice for the plaintiffs. Either situation is unprecedented.

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Public Citizen statement on ruling in favor of Chevron

Speaking of the Chevron case, there was just a major development. Here's the ruling, and here's our statement:

Will Chevron Case Take Down Trade Pact ‘Investor-State’ Enforcement System?

Unprecedented Ruling Today by International Investor Tribunal Orders Ecuadorian Government to Violate Its Constitution, Interfere in Its Independent Court System to Help Chevron Evade Liability for Amazonian Contamination

WASHINGTON, D.C. – An unprecedented ruling, in which an investor-state international arbitral tribunal initiated by Chevron ordered the Ecuadorian government to interfere in the operations of Ecuador’s independent court system on behalf of the oil giant, provides a chilling glimpse of how corporations are trying to use international investor tribunals to evade justice, said Public Citizen.

After having lost on the merits in Ecuador and U.S. courts and after 18 years of trying to stall judgment, Chevron turned to an ad hoc “investor-state” tribunal of three private lawyers as the last chance to help the company avoid paying to clean up contamination in the Amazonian rainforest. Chevron is trying to get this private tribunal to suspend enforcement of or alter an $18 billion judgment against Chevron rendered by a sovereign country’s court system.

The tribunal issued a ruling yesterday even though it has not even determined that it has jurisdiction over the case. Past such international investor cases in which tribunals have ordered governments to pay cash damages to corporations have led to growing controversy.

“The Ecuadorian government should not violate its own constitution and interfere with its independent courts’ order for Chevron to clean up its horrific contamination in the Amazon, because some unelected ad hoc tribunal of three private sector lawyers called together by Chevron to meet in a rented room in Washington, D.C., pretends to have the authority to second-guess 18 years of U.S. and Ecuadorian court rulings,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

“Consider the broader implications of this star chamber ‘investor-state’ system: How can a panel of three unelected private sector lawyers order a sovereign government to violate its own constitution’s separation of powers and interfere in its court system, all to help Chevron (a company whose severe contamination of the Ecuadorian Amazon has been repeatedly proven), and how can that tribunal do this all before it has even decided that it has jurisdiction over this case,” Wallach said.

Meanwhile, the three private-sector lawyers serving as tribunalists on this kangaroo court will continue to rack up large hourly fees even as they order Ecuador’s government to help Chevron deny justice to the 30,000 Amazonian indigenous people who have won a historic $18 billion clean-up of deadly environmental contamination. Tribunalists in this system, who alternate between serving as “judges” and representing corporations in cases before panels of their colleagues, are paid on an hourly basis.

“The only silver lining of this obscene ruling is that having one of these shady investor-state tribunals presume to attack a country’s constitution, justice system and 30,000 people whose futures rely on Chevron cleaning up its mess could lead to the implosion of the entire investor-state system, which international companies are increasingly using to try to evade justice worldwide,” said Wallach.

These unaccountable investor-state tribunals have issued perverse rulings in the past on behalf of corporate claimants. Recent U.S. trade agreements empower foreign corporations to use this system to skirt our domestic courts and directly use our government before these corporate tribunals to obtain payment of unlimited taxpayer funds when they claim domestic environmental, land use, health and other laws undermine their “expected future profits.”  More than $350 million has been paid by government to corporations in attacks on toxics bans, environmental issues and zoning permits under the North American Free Trade Agreement (NAFTA.) Billions in additional claims are pending. Possible inclusion of the investor-state private enforcement system for corporations to sue governments is becoming one of the most controversial issues in the first “trade” deal the Obama administration is negotiating – a new Trans-Pacific Partnership trade deal.


Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, visit www.citizen.org.

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Perils of a two-track justice system

During last week's events on the Chevron v. Ecuador investor-state case, someone asked an interesting question: say the Ecuadoran domestic ruling for the plaintiffs (who allege harm from environmental contamination by Texaco, now Chevron) stands. Say their legal team moves to attempt to enforce that ruling in other courts (say courts in Venezuela, where Chevron has some assets). How would a U.S. court treat the Ecuadoran or Venezuelan ruling?

This question actually perfectly illustrates the offensiveness of the two-track justice system that the investor-state system represents: the Ecuadoran plaintiffs would actually receive more favorable treatment of their enforcement actions if their original case had been an investor-state arbitration rather than a national court case. (Not that they would have standing in any case. I'm just sayin'.)

The U.S. (along with Ecuador and Venezuela) is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). An investor-state arbitral award anywhere in the world can be enforced in the U.S. with respect to assets of the respondent located in the U.S., which is considered a “secondary jurisdiction” under U.S. court interpretations of the Convention.

In 1985, the U.S. Supreme Court put its stamp of approval on the enforcement of arbitral awards. This appeared to be motivated in part by a desire to avoid losing some of this “business” to France and the UK. (For a fascinating history of this, see this book by Yves Dezalay and Bryant Garth.) As the court wrote in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.: “[C]oncerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce ... agreement[s]” to submit disputes to binding international arbitration.

However, most foreign court rulings (like the Ecuadoran ruling) will have difficulty being enforced in the U.S. The U.S. (along with almost every other country in the world) is not party to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, which would have set up an international framework for this.

As a consequence, legal scholar Brian Richard Paige writes, each U.S. state has different practices regarding recognition of foreign judgments. Moreover, the U.S. Supreme Court in Hilton v. Guyot, 159 U.S. 113 (1895), ruled that the U.S. would only enforce foreign rulings if the foreign government granted reciprocity, i.e. enforced U.S. rulings. Since most foreign governments hate U.S.-style class action cases, U.S. courts have been wary to recognize foreign judgments. As the Hilton case stated:

“When an action is brought in a court of this country, by a citizen of a foreign country against one of our own citizens, to recover a sum of money adjudged by a court of that country to be due from the defendant to the plaintiff, and the foreign judgment appears to have been rendered by a competent court, having jurisdiction of the cause and of the parties, and upon due allegations and proof, and opportunity to defend against them, and its proceedings are according to the course of a civilized jurisprudence, and are stated in a clear and formal record, the judgment is prima facie evidence, at least, of the truth of the matter adjudged; and it should be held conclusive upon the merits tried in the foreign court, unless some special ground is shown for impeaching the judgment, as by showing that it was affected by fraud or prejudice, or that by the principles of international law, and by the comity of our own country, it should not be given full credit and effect.”

However, as Paige writes, the Hilton Court refused to domesticate the French judgment on the ground that there was no showing that French courts would grant reciprocal treatment to judgments of the United States. As such, “the comity of our nation” did not require the Court “to give conclusive effect to the judgments of the courts of France.”

This stuff gets very complicated. Take a recent case in U.S. federal courts, KBC v. Pertamina. KBC was a Cayman company that had a contractual relationship with Pertamina, an Indonesia state owned enterprise. They agreed to arbitrate if they ran into problems, on Indonesian territory under UNCITRAL rules. On December 18, 2000, the arbitral panel issued a final decision awarding KBC more than $261 million in damages, lost profits, and costs of arbitration.

Pertamina asked for Swiss courts to overturn the award, which they did not do.

KBC, for its part, asked a Texas federal court to enforce the judgment. Pertamina appealed, but refused to post a bond. KBC then took it to New York court. Both courts upheld the arbitral award, on the basis of comity and the 1985 Mitsubishi precedent.

But then Pertamina launched a case in Cayman courts, arguing that the whole dispute was fraudulent. KBC then asked U.S. courts to enjoin the Cayman action, which they did, this time without referencing comity, but instead the need to uphold the New York Convention.

The case shows that an arbitral award in favor of Chevron is going to be given much more weight in U.S. courts than an Ecuadoran (or Venezuelan) court ruling in favor of the Ecuadoran plaintiffs.

I’m sure there’s a lot more legal complexity than what I’m capturing here in this quick review, but the comity doctrine seems to be among the most elastic on the books.

Moreover, the recent ruling in Donziger v. Chevron in the NY courts shows that U.S. judges were pretty unwilling to treat their Ecuadoran counterparts as equal. In a March 2011 ruling, Judge Lewis Kaplan wrote "that Ecuador has not provided impartial tribunals or procedures compatible with due process of law." While this was vacated in September, it definitely gives a flavor of what might go down.

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Tucker in Extra!: The Trade Debate That Wasn’t Reported

Our own Todd Tucker has a piece on the media distortion of last year's trade debate in this month's edition of Extra!, Fairness and Accuracy in Reporting's magazine. Here’s a snippet:


In the 16 months leading up to the congressional vote on a set of trade deal with Korea, Colombia and Panama in mid-October, new reporting on the agreements scarcely mentioned that critics existed; when they were acknowledged, their objections were frequently mischaracterized. With media doing little to evaluate misleading claims made by the trade pacts' proponents, all three were approved by Congress by considerable margins.

There were two major points that opponents of the trio of deals – including  labor, environmental, consumer and even Tea Party groups – consistently emphasized in reports, press releases, letters and direct outreach to reporters.

First, these trade deals were modeled on the controversial North American Free Trade Agreement (NAFTA), a pact whose actual content reporters have historically paid little attention to (Extra!, 11-12/97). The combined text of the three new deals was nearly 4,000 pages; as with NAFTA, the bulk of the provisions were not related to "trade" issues per se, but rather restrict how the U.S. and the other nations might regulate their domestic economies. For instance, corporations are given new rights to challenge environmental and other regulations outside of national court systems, and demand that taxpayers compensate them for regulations' potential impact on profits.

Second, unlike earlier trade deals, even the government's own projections showed that the pacts would increase the U.S. trade deficit (Extra!, 10/11). The projections were produced by the independent U.S. International Trade Commission (ITC), which typically produces overly rosy estimates of trade deals' impacts.

But at two of the country's most prominent papers, the New York Times and the Wall Street Journal, such criticisms were almost entirely absent.


The full article is available by subscription.

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Election 2012: the Candidates on Trade

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


With the budget and other scandals dominating political discourse, little space has remained for discussion of trade policy among possible presidential candidates.

To fill this void we decided to examine exactly where the politicians fall on key trade issues:


Although foreign policy hasn’t always been her strong suit, Rep. Michele Bachmann (R-Minn.) is pretty confident about her views on trade. Bachmann interrupted her presidential campaign and broke a streak of 88 absences to cast a vote in favor of the free trade deals with Korea, Colombia and Panama. In a press release she writes that these deals will “spur economic growth… without cost to taxpayers.” Notably, the representative voted against Trade Adjustment Assistance, which would provide support for workers displaced by the deals. Bachmann also voted against Fast Track cancellation in 2008 and in favor of the Peru trade deal in 2007.

In a blog post urging lawmakers to pass the Korea, Colombia and Panama trade deals, Bachmann writes that the “role of free trade as an expression of liberty….signifies the very principles our country was founded upon.” Unfortunately, these trade deals were negotiated under Fast Track, leaving Congress no authority to amend the agreements. (The constitution, or the document our country was actually founded upon, outlines a system of checks and balances granting Congress the power to “regulate commerce with foreign nations”).

A self-proclaimed proponent of free trade in its most pure form, Rep. Ron Paul (R-Tex.) opposes NAFTA-style trade deals because they erode U.S. sovereignty and are unconstitutional. He has voted against almost every trade deal that has surfaced during his tenure in office, including Peru, Oman, Bahrain, CAFTA, Australia, Singapore and Chile. Paul has also been an advocate of withdrawing from the World Trade Organization.

Continue reading "Election 2012: the Candidates on Trade" »

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Sherrod Brown Tosses the Panama FTA

Well, not quite. But, man, that FTA text does look pretty heavy, and like it could put a hurtin' on some of the senators in the room that are against fair trade.

But here's a floor speech from fair trade champion Sen. Sherrod Brown (D-Ohio) on the night the Senate voted on the Panama, Korea and Colombia trade deals. It's about 30 minutes, and a very eloquent description of why these trade deals are no longer primarily about "trade," but about how we regulate our domestic economy. Brown's TRADE Act would go a long way to getting "trade" policy right.

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Wallach and Tucker in American Prospect: Parties realign on flawed trade deals

Our own Lori Wallach and Todd Tucker have a piece in the American Prospect today. Here’s a snippet:

American Prospect logoAs he gears up for a difficult re-election campaign, President Obama risks losing key swing states that he won in 2008 because of a recent flip-flop on trade commitments…
Even the government’s own study, produced by the U.S. International Trade Commission (ITC), showed that these pacts would increase U.S. imports by more than exports…
Instead of probing such matters, most mainstream press reports over the entire four-plus year debate simply parroted corporate and Obama-administration talking points.

The missed political storyline, too, was equally astounding. Two-thirds of Democratic House members opposed Obama on the Korea pact and 82 percent who opposed him on the Colombia pact. It's his biggest split with House Democrats thus far. The number who voted against the deal is even greater than the percentage of House Dems who opposed the Patriot Act (63 percent) or the war-funding bills (56 percent). And of course, Obama got nothing in return for the capitulation: Republicans advanced the trade pacts while blocking his second stimulus package. So much for negotiation.

It took Bill Clinton nearly eight years of NAFTA job losses, sellouts, and scandals to have about two-thirds of the House Democrats vote against China’s entry into the World Trade Organization in 2000. Obama managed to meet and beat that record with his first trade votes. The percentage of Democratic House votes against these deals even surpassed Democrats’ average level of opposition to Republican presidents’ trade initiatives.

Click here for the full article.

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Trade Talks in Peru Meet Strong Opposition

As trade negotiators from the U.S. and eight other Pacific Rim countries met in Lima, Peru this week for Trans-Pacific Free Trade Agreement (FTA) talks, Peruvian and global activists criticized the continued secrecy of the talks and the public health implications of recently leaked texts on drug patents and pharmaceutical pricing.

Read Public Citizen's statement about the dangers of the leaked U.S. proposals.

And here's some television coverage from a leading Peruvian news network of a civil society rally outside the hotel where talks are taking place, featuring some of our Peruvian and international allies.



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Vast Majority of Dems Abandon President, and Media Misses It

It's typically treated as pretty newsworthy when a majority of a president's own party votes against a signature presidential initiative. Double that when over two-thirds do so. Triple the newsworthiness when it's the first time that magnitude of opposition has occured in a president's tenure.

Quadruple for when talking heads are debating whether elected officials will carry the banner of a wide-ranging new progressive protest movement that has declared its independence from that same president. And quintuple when the president has presented a two-plank carrot-stick deal with Republicans - controversial trade deals that won't create jobs plus stimulus spending that will - and when the Republicans move forward with the job-killing plank. But the job-creating plank? Not so much.

This describes precisely what happened with last night's votes to expand NAFTA-style deals to Korea, Colombia and Panama. But you wouldn't know it from any of this morning's press coverage of the vote, which lauded the "bipartisanship" of a deal that was supported by only a tiny cohort of corporate Democrats.

This is deeply misguided, as Lori Wallach noted over at FireDogLake,

"Today a larger share of House Democrats voted against a Democratic president on trade than ever before. It took Bill Clinton nearly eight years of NAFTA job losses, sell outs and scandals to have (not even) two-thirds of the House Democrats vote against him on trade."

Obama managed to do the same in three, getting Democratic opposition nearly 20 percentage points higher than Clinton ever did.Over 82 percent of Democrats opposed the Colombia FTA, while over two-thirds opposed the Korea FTA and over 64 percent opposed the Panama FTA. Even a majority of the New Democrats - the most pro-NAFTA grouping in the party - opposed. These percentages go well beyond the previous high-water mark of House Dem revolt from the president (the February vote on the Patriot Act).

Why were Dems so opposed? The deals won't do anything to help the jobs crisis, and could make things worse. On top of that, they contain hundreds of pages of non-trade provisions that put obstacles in the way of re-regulation of Wall Street and environmental protection. Rep. Mike Michaud (D-Maine), a leading Blue Dog, lays out the analysis in this compelling speech that takes the White House to task.

Democrats' declaration of independence wasn't the only thing that was missed in the coverage. The media also missed the storyline of the Tea Party's abandoning of its principles. Candidate Rand Paul, for instance, railed against the WTO as as an intrusion on U.S. sovereignty. Countless House Tea Party candidates ran paid ads attacking job offshoring, helping them make key inroads among working class voters. Yet virtually the entirety of the Tea Party backed candidates sided with the president for job offshoring deals.

Indeed, there has always been several dozen Republicans who could be counted on to vote against unfair trade policy - even in super-close votes like Bush's push in 2005 for CAFTA, which passed by two votes. Fast forward to 2011, when ONLY SIX Republicans voted against the Panama FTA. This is a historic shift for a party who has always had a more trade-skeptical segment going back centuries.

These political shifts are likely to have major consequences in the upcoming elections. Many Democrats have - like the movement on the streets - declared their political independence. Will it be enough to make up for being down-ticket from a president who flip-flopped on his own campaign pledges to overhaul U.S. trade policy? The world will be watching.

(P.S. The media also was also mum that the president was misrepresenting the government's own studies on the likely economic impact of the deal. These studies, unlike similar studies for all earlier trade deals, showed an increase in the trade deficit. For virtually the entire four-year debate on the bills, the media mentioned only the projected export increase, without discussing the projected import increase. This was Very valuable political cover, but not particularly good reporting. But that's another story.)

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Job-Killing Trade Deals Pass Congress Amidst Record Democratic Opposition

Obama and Tea Party Flip Flop on Fair Trade Campaign Commitments

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

With nine percent unemployment and Americans desperate for job creation, it is unconscionable that President Obama and House Republicans would push through a trio of NAFTA-style job-killing trade agreements that even the government’s own studies show will increase the U.S. trade deficit.

This represents a complete flip-flop for President Obama, who won crucial swing states by pledging to overhaul our flawed trade policies. So it is no surprise that a sizeable majority of Democrats in Congress voted against these agreements, against Obama and for American jobs.

Today a larger share of House Democrats voted against a Democratic president on trade than ever before. It took Bill Clinton nearly eight years of NAFTA job losses, sell outs and scandals to have nearly two-thirds of the House Democrats vote against him on trade.

Given the strong Democratic opposition, ultimately it was the Tea Party GOP freshmen who passed these job-killing deals despite their campaign commitments at home to stand up for Main Street businesses, against more job offshoring and for Buy American requirements. The three pacts explicitly ban Buy America procurement policies. The Korea FTA is projected to increase the trade deficit, with seven U.S. industrial sectors hardest hit and job losses of 159,000 in its first seven years.

Members of Congress that voted for these job-killing agreements – backed by Wall Street and America’s most notorious job-offshoring corporations and harmful to American workers, small business and consumers – will face a reckoning as the damage of these pacts hits home. We promise to closely track and publicize every development.

Everyone is asking what the Obama administration could have been thinking to push the sorts of NAFTA-style trade deals that polls show majorities of Democrats, Independents and even GOP voters oppose as job killers, especially after the lesson of the 1993 NAFTA vote, when a Democratic president’s blurring of the distinctions between the parties on trade and jobs caused a disgruntled base to stay home. 

Every election cycle, more Democrats and GOP are campaigning against these sorts of NAFTA-style trade pacts. Given this and the high unemployment rate, it will be very rough for those officials who then betrayed folks at home and voted for these deals loved only by Wall Street and job-offshoring corporations.

Record of Congressional Democratic Opposition to Democratic Presidents on Trade Pacts

- 82.3% of House Democrats opposed the Colombia FTA (158 Democrats against, 31 for)

- 67.7% of House Democrats opposed the Korea FTA  (130 Democrats against, 59 for)

- 64.1% of House Democrats opposed the Panama FTA (123 Democrats against, 66 for)

- 60.6% of Democrats opposed NAFTA (1993)

- 35% opposed the WTO (1994)

- 65.56% opposed China PNTR (2000)


Record of Congressional Democratic Opposition to GOP Presidents on Trade Pacts

- 62.6% opposed the Chile FTA (2003)

- 62.14% opposed the Singapore FTA (2003)

- 41.3% opposed the Australia FTA (2004)

- 39.32% opposed the Morocco FTA (2004)

- 92.6% opposed the Central America Free Trade Agreement (2005)

- 40.4% opposed the Bahrain FTA (2005)

- 87.6% opposed the Oman FTA (2006)

- slightly more than half opposed the Peru FTA (2007)

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House Dems Take White House to Task

Check out this powerful speech by Rep. Mike Michaud (D-Maine), a fair trade champion, sayin' stuff that needs to be said:


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Livetweeting the Unfair Trade Pact Trifecta

Follow us on Twitter @pcgtw.Going on now!

Also, check out Fairness and Accuracy in Reporting's take on the press coverage around the FTAs, and Glenn Hurowitz over at HuffPost on the awful political calculus the adminstration made by taking up these deals.

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Obama Shifts Away From Jobs Message to Promote Bush-Signed Trade Pacts Projected by Official Government Studies to Increase Trade Deficit

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

It is bizarre that President Barack Obama has switched from his long-awaited focus on jobs to spending effort passing three George W. Bush-signed, NAFTA-style trade deals that official government studies show will increase our trade deficit even as polls show most Americans oppose NAFTA-style trade pacts and recognize that they kill American jobs.

The only way these deals will pass is if congressional GOP lawmakers expose themselves to the foreseeable election attack ads and provide President Obama almost all of the votes; most congressional Democrats will oppose these deals, which are loved by the U.S. Chamber of Commerce and despised by the Democratic base groups.

Apparently, the Obama team has a way to win re-election that does not involve Ohio or other industrial swing states. We saw with NAFTA in 1993 the dire political consequences of a Democratic president blurring distinctions between the parties on this third-rail issue of trade and jobs. And unlike NAFTA, this time, even official government studies show that these pacts will increase our trade deficit.

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Trade disaster: Congress votes tomorrow

A message from Lori Wallach, Director of Public Citizen's Global Trade Watch

You don't hear from me often. Over the past year, I have spend most of my time on Capitol Hill, meeting with members of Congress, educating them about our current flawed trade policy and how we can create a trade model that works.

I have been working to get a majority on Congress to say NO to the three devastating NAFTA-style trade deals signed by Pres. Bush that now Pres. Obama is trying to ram through Congress.

But today, I urgently need a favor from you. It will take about five minutes. Congress will vote on these job-killing, unsafe-import-flooding deals on Wednesday. I need you to pick up the phone and call 1-800-718-1008 right now to stop the three unfair trade deals with Korea, Colombia, and Panama.

Take 5 minutes to save jobs. Dial 1-800-718-1008 and tell your Representative to vote NO on all three flawed trade deals.

Here’s why:

  • The Korea trade deal is the largest offshoring deal of its kind since NAFTA. If approved, the deal will displace 159,000 American jobs in the first seven years. Even the official U.S. government study on the Korea pact says that it would increase our trade deficit, and it hits the "jobs of the future” sectors hardest – solar, high speed trains, computers. [Learn more]
  • We should have never even discussed a new trade deal with Colombia, the world capital for violence against workers. More unionists are assassinated every year than in the rest of the world combined. In 2010, 51 trade unionists were assassinated. Do you think we would consider a trade deal with a county where 51 CEOS were murdered? So far in 2011, another 22 have been killed, despite Colombia’s heralded new "Labor Action Plan.” [Learn more]
  • The Panama agreement has many of the same problems as the other two deals -- undercutting the reregulation of the big banks and speculators who destroyed our economy and empowering foreign investors to attack U.S. health, safety, labor and environmental laws before foreign tribunals. But, Panama is also one of the world’s largest tax havens. There, rich U.S. individuals and over 400,000 corporations take advantage of the offshore financial center, many dodging paying the taxes our communities desperately need. This FTA would undercut our current tools to fight tax dodging and money laundering. [Learn more]

Stop the trade deals that replicate the failed policies of the past. Call your Representative today.

Behind the scenes and throughout the country, our team has done everything we can do to try and get through to the leaders in Congress to stop these trade agreements. But it looks like many of our leaders in Washington—both Democrats and Republicans—are siding with corporate lobbyists instead of learning from the experience of working Americans.

YOU know the reality of these trade deals better than corporate lobbyists—and Congress needs to listen to you.

Please call 1-800-718-1008 right now.

Speak out with millions of Americans against the job-killing trade deals that only reward fat cats, off-shore our jobs and undermine our environmental and financial stability safeguards.

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Lori Wallach on HuffPo: "Obama Flip-Flopped Off Trade Cliff"

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


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Obama Flip-Flopped Off Trade Cliff

"Apparently, Obama has a plan for winning re-election that does not involve Ohio... oh, and he is tired of talking about job CREATION..."

Read the entire piece at the Huffington Post.

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At least 18,600 jobs offshored by corporations signing pass-the-FTAs ad

As part of the corporate ad campaign to push congressional passage of the NAFTA-style trade deals with Korea, Colombia, and Panama, the heads of 32 corporations placed an "open letter" in yesterday's National Journal Daily (subscription only). Thing is, many of these very corporations are certified by the U.S. government as having offshored thousands of jobs under past U.S. trade agreements. That's right, the advertisement claiming that these Bush-era FTAs are needed to create U.S. jobs is sponsored by many chronic trade-agreement offshorers of, um, U.S. jobs.

Moreover, while these CEOs claimed that these deals would create U.S. jobs, the government’s own official studies predict an increase in the U.S. trade deficit from the deals. And, an independent economist projected the net loss of hundreds of thousands of jobs from the pacts. The historical record of similar trade agreements is that the United States has slower export growth to countries we have NAFTA-style deals with than with other countries.

In reality, it's likely that these corporations are licking their chops waiting for the offshoring opportunities that will come with another batch of unfair trade deals. Thanks to the Department of Labor's Trade Adjustment Assistance (TAA) data on workers laid off due to imports and offshoring, we can see how these corporations have taken advantage of past unfair trade deals to ship jobs overseas. (And, given it provides a list of corporate offshorers, we can also see why the Republicans in Congress are keen to kill off this program that provides training and extended unemployment benefits to workers whose are certified as casualties of trade pacts, offshoring, and rising imports.)

We have a searchable form of the TAA database on our website. There you can see that some of these 32 corporations have shipped a combined 18,600 American jobs overseas since 2001. Consider that an example rather than a full accounting of the damage, as TAA is a narrow program that excludes many workers who may well have lost their jobs to trade pacts and imports but who do not meet the program's criteria. If a broader range of trade-related job loss is utilized, the Department of Labor reports over 35,000 workers who have lost their jobs at these companies due to trade since 2001.

Just to pick out a few examples, Whirlpool took advantage of NAFTA and shipped over 1,000 jobs at their Fort Smith, Arkansas facility to Mexico in 2008. Caterpillar, a major backer of the proposed trade pact with Colombia, laid off 338 workers at its Mapleton, Illinois facility when it shifted their work to Mexico. And it looks like Texas Instruments was getting a head-start on the offshoring possibilities offered by the Korea trade deal when it shipped 149 jobs at its Attleboro, Massachusetts facility to South Korea, Mexico, and China in 2005. It just so happens that electronics is going to be the hardest-hit sector in terms of the ballooning deficit from the Korea pact, so the remaining Texas Instruments workers in the United States should be wary.

This ad came the day of Obama's big jobs speech, and it turned out that he slipped in one definitely anti-jobs pitch, advocating for the passage of the Korea, Colombia, and Panama pacts. (Although this time, unlike in the State of the Union address, he did not make the dubious "70,000 jobs supported" claim.) If this isn't bad enough, Larry Summers, Obama's former director National Economic Council, last month argued that "We should not oppose offshoring or outsourcing."

After the jump is a list of the incidents of offshoring at the corporations that signed the letter pushing the three trade pacts:

(UPDATED 9/12/11)

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U.S. measures to reduce teenage smoking deemed WTO violation

U.S. measures to reduce teenage smoking violate World Trade Organization (WTO) rules, according to a panel ruling released late last week. Indonesia successfully argued that the U.S. Family Smoking Prevention and Tobacco Control Act (FSPTCA) of 2009 violated WTO rules. The ruling opens the door to more teenage tobacco addiction, while further imperiling the legitimacy of a WTO that rules against environmental, health and other national policies 90 percent of the time.

The FSPTCA took a series of unprecedented and bold measures to combat teenage smoking, including Warning the banning of many forms of flavored cigarettes. There is substantial evidence that tobacco companies produce and market these cigarettes as "starter" or "trainer" cigarettes in order to hook teenagers into a lifetime of nicotine addiction.

However, as the U.S. noted in its defense in the WTO case, the U.S. did not ban all types of cigarettes. In particular, regular tobacco and menthol cigarettes were excluded from the ban. The justification for these exclusions was that, unlike candy flavored or clove cigarettes, large numbers of adults are also hooked on regular and menthol cigarettes. To abruptly pull these products out of the market could cause a strain on the U.S. healthcare system (as lifetime addicts would instantly seek medical treatment for wrenching withdrawal symptoms) and might lead to a rise in illicit black market sales and associated crime. Nonetheless, various studies were ordered on the feasibility of banning menthol cigarettes in the future.

The FSPTCA banned candy and clove cigarettes regardless of where they were produced or who produced them. But Indonesia successfully argued that, since its exporters are the primary providers of clove cigarettes to the U.S. market, the FSPTCA constituted de facto discrimination, in violation of WTO rules under the Agreement on Technical Barriers to Trade (TBT). The WTO panel accepted this argument, despite the fact that the FSPTCA was totally non-discriminatory and many U.S. cigarette makers (such as those that make cola-flavored cigarettes) were also blocked from making these harmful products.

This severe blow to consumer protection comes on the heels of two other WTO rulings against America's dolphin-safe tuna and beef country-of-origin labels, and are likely to put a significant damper on the Obama administration's efforts to pass trade deals with South Korea, Colombia and Panama that contain similar anti-consumer rules.

More on the details of the case after the jump.

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U.S. Trade Representative's New Jobs Strategy

Last week, amid mounting signs that the job market may be deteriorating further, Tim Robertson, Director of the California Fair Trade Coalition, interviewed U.S. Trade Representative (USTR) Ron Kirk about the implications of the Korea, Colombia, and Panama trade deals. In the course of the interview, Kirk seemed to suggest that the Obama administration's trade policy encouraged shrinking the number of jobs in the United States. According to Kirk, our massive trade deficit is inconsequential since the imports constitute goods that "we don't want to make in America." He explains:

Let's increase our competitiveness... the reality is about half of our imports, our trade deficit is because of how much oil [we import], so you take that out of the equation, you look at what percentage of it are things that frankly, we don't want to make in America, you know, cheaper products, low-skill jobs that frankly college kids that are graduating from, you know, UC Cal and Hastings [don't want], but what we do want is to capture those next generation jobs and build on our investments in our young people, our education infrastructure. Our advanced services like [at the architecture firm where we met], there's no reason in the world ... why would we not want to capture the economic benefit of that here in America? I mean, I would argue that that is exactly the reason that we're doing it.

With the unemployment rate at nine percent, it's hard to fathom a government official saying that the United States should pass up jobs, even if those jobs don't require a degree. Shoes are arguably some of the "cheaper products" that Kirk references. The Washington Post recently ran a piece about New Balance's shoe plant in Maine where the workers are glad to be keeping their jobs, contrary to Kirk's assertion that we don't want to make them anymore:

“We want to fight really hard to keep this business in Maine,” said Lori Cook, 28, a single mom with two kids. “I’d like to keep my job.”

The Korea trade deal, projected to result in the loss of 159,000 U.S. jobs, will not just displace workers in the apparel industry, however. The Korea FTA will increase the U.S. deficit in cutting-edge industries, including electronics and motor vehicles, costing us even the "next generation" jobs that Kirk extolls. The Korea, Colombia, and Panama trade deals clearly endanger President Obama's job creation agenda, and USTR Ron Kirk should go back to the drawing board to formulate a trade policy that creates jobs instead of one that eliminates them.

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Brookings FTA Paper Falls Short on the Facts

Last month, the Brookings Institution published a policy brief advocating for the passage of the Korea, Colombia and Panama trade deals (or FTAs). The policy brief contains little in the way of new research, but it certainly quotes existing research in a selective way.

Like the Obama administration, the policy brief incorrectly cites the U.S. International Trade Commission's (USITC) predictions for the change in exports to Colombia under the Colombia FTA as the increase in U.S. exports ($1,060 million), rather that prediction for the change in total U.S. exports under the FTA ($654 million). Moreover, the brief does not discuss the jobs implications of the fact that U.S. imports will increase more than exports under the Korea and Colombia trade deals. Since imports will increase more than exports, net job losses will likely result.

By now, this export mistake is familiar. What is new in the Brookings policy brief is it emphasizes the USITC's predicted change in nominal GDP under the FTAs. The policy brief says that the USITC predicts the Korea FTA will boost U.S. GDP by up to $12 billion and the Colombia FTA will boost GDP by $2.5 billion. (The USITC did not give a GDP estimate for the Panama FTA since the model that they used for that study could not estimate GDP changes.)

In reality, the numbers that the policy brief quotes are actually the USITC's estimates for changes in nominal GDP, i.e. changes in GDP that take into account price changes due to the FTAs. Basically, this is the number that is not adjusted for the inflation that occurs within the model. In a footnote to its $12 billion GDP estimate for the Korea deal, the USITC explains:

GDP here is defined as nominal GDP, which takes into account both the price and quantity changes of its components. Welfare, on the other hand, summarizes the real (i.e., exclusive of price effects) value of present and deferred consumption....Increases in the prices of consumption or investment will lead to an increase in GDP, but not in welfare.

In plain English, this means that the $12 billion figure cited in the policy brief is not the change in the quantity of goods and services produced by the U.S. economy. Rather, a separate measure called welfare represents this change in the real value of the economy that actually matters to businesses. Browsing through the tables (specifically, Table 2.1) in the report reveals that the USITC's estimate of the real increase in GDP under the Korea FTA is only $1.8-2.1 billion. Real GDP under the Colombia FTA is expected to increase by $419 million.

So, the predicted increase in GDP is smaller than claimed, but there's still an increase, and therefore we benefit, right? The truth is that the small predicted real GDP gains under the FTAs will not be enjoyed equally by everyone. The big economic issue with FTAs is that some of them may boost overall GDP slightly, but the gains go almost exclusively to corporations and those Americans who already have a lot of wealth. Meanwhile, the adjustment costs fall upon the middle and working classes, leading to net losses for them. Incidentally, the USITC's model simply assumes that adjustment costs don't exist. This distributional issue in trade policy is critical. Josh Bivens at EPI estimates that trade flows have increased income inequality in the U.S. by 7 percent, costing an average household $2,000 per year.

The policy brief also repeatedly claims that the U.S. is losing market share in Asia to its competitors. It argues that the Korea FTA will reverse this "trend."  This claim has scant evidence to back it up. As we pointed out in our latest Trade-ifact, U.S. exports to the Pacific region have grown 35 percent since 2005, while overall U.S. exports to the world have grown at a slower rate, 25 percent, over the same period.  And without FTAs the United States continues to edge out competitors, increasing its market share in most of the major Asian economies since 2005, including South Korea.

In a claim about the "benefits" of the Colombia FTA, the authors of the policy brief seem uninformed about the realities of Colombia’s rural economy. They write, "[The Colombia FTA] supports U.S. goals of helping Colombia reduce cocaine production by creating alternative economic opportunities for farmers." However, the Colombian Ministry of Agriculture and Rural Affairs conducted a study of the effects of an FTA with the U.S. upon nine primary agricultural products and found that full liberalization would lead to a 35 percent decrease in employment in those sectors (see pages 162-163 of the study). The study said that with an FTA without agricultural protections, rural Colombians “would have no more than three options: migration to the cities or to other countries (especially the United States), working in drug cultivation zones, or affiliating with illegal armed groups” (pg. 180). Thus, contrary to the claims of the policy brief, all evidence indicates that the FTA would reduce agricultural opportunities for farmers, possibly increasing cocaine production.

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Unlike Budget Debate, Basic Math Error on Trade Continues to Go Unchallenged

The Obama administration spent much energy over the weekend attempting to discredit Standard & Poor’s credit rating agency’s downgrade of U.S. debt, which they said was based on a “basic math error of significant consequence.”

In sum, the administration argued that S&P applied the Budget Control Act’s deficit reduction dollar amount of $2.1 trillion to a non-inflation adjusted baseline scenario, when that number was derived from a scenario where discretionary spending levels grew with nominal GDP. In 2021, government debt as a share of GDP would be 93 percent under S&P’s original methodology, while it would be 85 percent under what Treasury maintains is the correct methodology. This claim of an error has been all over the press for days.

It would sure be nice if the Treasury and press got as worked up about basic math errors that the White House itself is making on the three pending trade deals with Korea, Colombia and Panama.

The administration maintains that the Korea deal will boost U.S. exports by $11 billion, when in fact the administration’s own numbers within the U.S. International Trade Commission study show that the deal will lead to a decline in net exports of about $416 million. The S&P’s debt number overstated the debt by about nine percent, but the administration’s claim of exports under the Korea deal overstates the magnitude of the change in the trade balance by 25,000 percent, in addition to getting the direction of the change wrong. If, as the Treasury Department says, the S&P debt error was “of significant consequence,” the administration’s trade-deal export claims must qualify as a misstatement of colossal consequence.

Similarly, the administration says that U.S. exports will increase by $1 billion under the Colombia deal, when the administration’s own numbers show that net exports will take a $66 million hit under the deal. (No estimates have been provided for the U.S.-Panama deal.)

Why these discrepancies? In its public statements, the administration is selectively looking only at one side of the ledger, extracting a number for bilateral exports, while not accounting for the overall change (the change in exports minus imports under the deal). In budget economics, this would be akin to looking only at what the government is taking in as revenue, without looking at what the government is spending. If the government simply assumed away any government spending, I’m betting that the press would call them on this “basic math error of significant consequence.”

The administration is also selectively looking at just the change in U.S. exports to Korea and Colombia under the pacts. But as the administration’s own reports show, these deals will also induce changes in trade patterns with other countries. At the end of the day, the U.S. is projected to be importing more than it is exporting as a result of these deals.

It is newsworthy that the administration’s own reports (produced by the USITC) conclude that net exports will decline under the deal, especially since their primary public rationale for the deals is that exports will increase. These USITC reports in the past have tended to be wildly optimistic, such as underestimating the increase in the U.S.-China trade deficit after China entered the World Trade Organization by $166 billion. But, the reports have nonetheless always concluded that, even if bilateral deficits increase, the global U.S. balance will improve. That is, until the reports on the three pending deals, and the deal with Peru (negotiations on all four were concluded in 2007), predicted a worsening of the overall balance.

This fact was even trumpeted by no less of a champion of NAFTA-style deals than Sen. Chuck Grassley (R-Iowa), who said that the total net export number is the “the one number that is of significance to our economic health.” (See full quote below, after the jump.)

It is unclear why the press continues to report as fact (or unchallenged assertion) the claim that the pending trade pacts will create jobs. These claims rely on using the wrong trade numbers from the government’s own study. Unlike many complex economic debates, all these numbers are publicly available, very straightforward and involve reading no more than two pages in two reports to simply verify the administration’s claims (pages 2-14 and 2-15 of the Korea report and pages G-12 and G-13 of the Colombia report). Moreover, the administration’s basic math error has been known for over nine months, and communicated to reporters and their editors repeatedly over that time (see “Survey of Studies on Potential Economic Effects of the Korea FTA Show Rising Deficits and Job Losses”,  “Survey of Studies on Potential U.S. Economic Effects of Korea Trade Deal Shows Rising Deficits and Job Losses, 2010 ‘Supplemental Deal’ Does Not Alter These Outcomes”, “Guide to the the State of the Union on Jobs, Exports”, “Previewing Ways and Means Chair Camp’s Request for USITC Analysis of the December 2010 Korea FTA Supplemental Auto Deal”, “The Korea FTA is Lose-Lose for the U.S. and Korea: The Facts”, “Here’s an Impediment to Job Creation That Ways and Means Hearing Should Discuss: Korea Trade Deal Is Projected to Increase the Overall U.S. Trade Deficit”.

Reporters can and should quote advocates of these trade deals, and explore their reasoning for wanting Congress to pass them. But, to the extent that job and export claims are based on the administration’s basic math errors, this needs to be pointed out in reporting.

(For what it’s worth, there is also no historical support for the notion that NAFTA-style deals increase exports in relative terms. This would also cast doubts on the administration’s stated rationale for pushing the agreements. However, one would not even have to examine the record to report that the administration is misrepresenting its own research.)

Continue reading "Unlike Budget Debate, Basic Math Error on Trade Continues to Go Unchallenged" »

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Incorrect Numbers Continue to Pop Up in Trade Reporting: Trade-ifact III

The announcement late Wednesday of a nebulous "agreement" in the Senate on a legislative "path forward" for the Korea, Colombia, and Panama trade deals (or FTAs), has renewed the trade chatter in the newswires. But we're still seeing a lot of questionable claims about the FTAs in these stories, so it's time for another edition of Trade-ifact.

For the third installment , we've organized the stories by theme.


Faulty Export Numbers

Misquotes of the official U.S. International Trade Commission (USITC) studies of the three trade deals continue to pop up in news articles, either directly or through quotes of FTA proponents.

As we have said before, FTA supporters only look at the USITC's bilateral export numbers and do not consider the USITC's projections on the change in overall U.S. imports. When the global changes in exports and imports are taken into account, the USITC studies reveal that net exports would decline by $482 million under the Korea and Colombia trade deals (instead of the “bilateral exports only” of $11-12 billion). The USITC made no overall trade estimate for Panama.) 

There were several stories that misreported this $12 billion export number as fact, including:

- Doug Palmer (Reuters), US Congress leaders agree path to pass trade deals (8/3/2011)

- Angus Loten (Wall Street Journal),  Trade Pacts Urged for Export Growth (7/27/2011)

There were several additional stories that reported the incorrect number as the opinion of an interviewee or the Obama administration, but failed to note its misleading origin. These included:

- Mark Drajem (Bloomberg), U.S. Senate Leaders End Impasse on Three Free-Trade Deals, Workers’ Aid (8/4/2011)

- Jim Abrams (AP),  Senate deal on taking up worker, trade bills (8/4/2011)

- Suzy Khimm (Washington Post),  How can Washington help create jobs? (8/3/2011)

- Doug Palmer (Reuters), U.S. business hopes debt deal clears way for trade (8/1/2011)

Doug Palmer’s stories also round up the administration's export claims from $12 billion to $13 billion.


Faulty Jobs Numbers

News stories are also continuing to report that the trade deals will create or support 70,000 jobs. This has got to be one of the most popular outright errors in the history of trade debates. As we show here, it is derived from applying an incorrect methodology to an incorrect number (bilateral export projection). But even if one accepts the administration’s methodological choices, applying that method to the correct number (net exports) would reveal a decline in jobs.

Doug Palmer's US Congress leaders agree path to pass trade deals (8/3/2011) misreported this number as fact.

There were several additional stories that reported the incorrect number as the opinion of an interviewee, but failed to note its misleading origin. These included:

Continue reading "Incorrect Numbers Continue to Pop Up in Trade Reporting: Trade-ifact III" »

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North Korean dictatorship poised to benefit from trade pact: Huffington Post

A new reporting and video series has been launched by Zach Carter and company over at the Huffington Post that will explore how the Korea trade deal will benefit the North Korean dictatorship.

As Carter writes,

In 2004, Hyundai inked one of the best land deals in history. For a mere $12 million, the South Korean car company secured the rights to 50 years of use on over 41,000 square miles of industrial space -- $292 per square mile, only about 10 percent higher than the rate the U.S. paid France under the Louisiana Purchase.

For a manufacturing giant, the Hyundai deal was a dream: plenty of space for factories, room for worker housing and a population that would work for less than half the wages that Hyundai was accustomed to paying for labor in its Chinese factories.

Products made In this sweatshop, finds Carter, can be incorporated into goods assembled in South Korea, and then shipped to the U.S. duty-free under the U.S.-South Korea trade deal. If the U.S. attempted to block it, South Korea could use trade pact rights to challenge the U.S.

Future installments will look at tax haven abuses in Panama and labor murders in Colombia, and how the package of three trade deals being pushed by the administration could make these matters worse.

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