Grand River Case Shows U.S. Open to Financial Liability in NAFTA Attacks on Public Health Laws

The State Department published the NAFTA award in Grand River Enterprises Six Nations, Ltd. et. al. v. United States of America last week, a month after it was dispatched privately to the parties. The case was brought against the United States by a Canadian tobacco corporation that sold tobacco on reservations in the U.S. and three Canadian members of the Haudenosaunee indigenous group who owned or did business with the corporation. The claimants argued that implementation of the deal that U.S. states made with tobacco companies in the 1990s and later to address underage smoking and public health concerns about tobacco violated their NAFTA rights. The award, and other associated documents, is available here:

While the United States thankfully prevailed in the case, the award raises serious concerns about NAFTA-style investment rules. Among the top concerns from my initial read of the award:

Even when governments win NAFTA disputes on the merits, taxpayers are on the hook for the multi-million dollar costs of arbitration. In this case, U.S. taxpayers had to cover nearly $3 million in legal and arbitration fees, despite the U.S. emerging victorious. (paragraph 241) The investor-state system is becoming so expensive that hedge funds are creating special financing vehicles to loan money to corporations and individuals pursuing attacks on national policies. While private companies can profit off of this system, taxpayers are left with nothing but liability for these often meritless claims.

NAFTA attacks allowed against public health measures. The U.S. states’ settlement with the tobacco companies was a complex response to a complex political and regulatory problem. In 1998, 46 U.S. states entered into a settlement agreement with Philip Morris Inc., R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corp., and Lorillard Tobacco Company, (“participating manufacturers” or PMs) to resolve claims that the states had filed seeking to recoup medical expenses incurred for treating smoking-related illnesses of indigent smokers and to pay for smoking reduction programs.  As part of the settlement agreement, the PMs agreed to pay the states over $246 billion over the next 25 years,  and to restrict marketing directed at children. 

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Environmental health at stake in first corporate attack under Peru NAFTA deal

It's February 1, which makes it two years since the Bush administration rushed to implement the NAFTA-style deal with Peru right before it left office, and over the objections of the congressional Democrats that had partnered with the administration to get it through Congress.

On the second anniversary of the Peru FTA implementation, we see a lead company attacking Peru's policies related to environmental health. Details about the Renco v. Peru case are scarce, but we know that the company involves a U.S. multinational that got upset after getting smacked with a U.S. lawsuit filed on behalf of 137 Peruvian children who have suffered from lead poisoning. Renco is now claiming $800 million from irritants related to its commitment to clean up the environmental mess on its site.

You can find information about the U.S. lawsuit here, and about the FTA investor-state case here, and here also here. And more after the jump...

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How much will this party cost?

Earlier this month, the Washington Post reported a dramatic uptick in the number of corporate investor4100628349_2ebd7ddc84_t challenges being heard by the International Centre for Settlement of Investment Disputes (ICSID) - a World Bank group charged with arbitrating investment disputes. So much so, that a new legal niche is growing to meet the demand:

Geography has been kind to the District law firms equipped to handle international dispute resolution. As the host city of the ICSID, which has seen its caseload grow from between one and four cases a year from 1972 to 1996 to an apogee of 37 cases in 2007 and 27 in the fiscal year of 2010, the attorneys here are in close proximity to the action. The nation's capital is also seen as a key connection point between Latin America, where nearly a third of ICSID cases originate, and the rest of the world. The Argentine economic crisis of the late 1990s and early 2000s prompted at least 40 ICSID cases on its own, prompting the country to open a special District office to oversee its interests here.

There must a better way to create jobs in Washington, DC - perhaps a way that doesn't also facilitate the  trampling of local public health and environmental protecions or drain taxpayer resources in the United States and in trading partner countries? For more details about the kinds of cases multinational investors bring before ICSID, see Public Citizen's NAFTA Chapter 11 database. Also read up on El Salvador's struggle to preserve its environment in the face of two recent CAFTA cases challenging Salvadoran mining policy decisions. 

In the coming months the U.S. Congress will decide whether to expand the ICSID party! If implemented, the Korea FTA would empower hundreds of U.S. and Korean multinational investors to bring suits against the U.S. and Korean governments at ICSID should they want to argue that their slew of new investor rights has been violated.

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Pentagon Can Buy Foreign Solar Panels

The New York Times recently reported about an important step forward with the Pentagon's plan to buy solar panels:

The military authorization law signed by President Obama on Friday contains a little-noticed “Buy American” provision for the Defense Department purchases of solar panels — a provision that is likely to dismay Chinese officials as President Hu Jintao prepares to visit the United States next week...

The new Buy American provision, created mainly by House and Senate conferees during a flurry of activity at the end of the lame-duck session of Congress, prevents the Defense Department from buying Chinese-made solar panels.

The American military is a rapidly growing consumer of renewable energy products, because it is extremely expensive and frequently dangerous to ship large quantities of fuel into remote areas of Iraq and Afghanistan.

The bill is the Ike Skelton National Defense Authorization Act for Fiscal Year 2011. Here's the relevant provision:


      (a) Contract Requirement- The Secretary of Defense shall ensure that each contract described in subsection (b) awarded by the Department of Defense includes a provision requiring the photovoltaic devices provided under the contract to comply with the Buy American Act (41 U.S.C. 10a et seq.), subject to the exceptions to that Act provided in the Trade Agreements Act of 1979 (19 U.S.C. 2501 et seq.) or otherwise provided by law.

      (b) Contracts Described- The contracts described in this subsection include energy savings performance contracts, utility service contracts, land leases, and private housing contracts, to the extent that such contracts result in ownership of photovoltaic devices by the Department of Defense. For the purposes of this section, the Department of Defense is deemed to own a photovoltaic device if the device is--

            (1) installed on Department of Defense property or in a facility owned by the Department of Defense; and

            (2) reserved for the exclusive use of the Department of Defense for the full economic life of the device.

      (c) Definition of Photovoltaic Devices- In this section, the term `photovoltaic devices' means devices that convert light directly into electricity through a solid-state, semiconductor process.

But dig a bit deeper into the NYT story to understand what the phrase "subject to the exceptions..." means in plain English:

Two prominent trade lawyers said in e-mails over the weekend that the law’s language meant that in practice, the Defense Department must buy solar panels from any country that signs the W.T.O.’s side agreement on government procurement. Earlier American trade laws require compliance with that agreement.

Virtually all industrialized countries have signed the side agreement, which requires free trade in government purchases. China vowed to sign it as soon as possible when it joined the W.T.O. in November 2001, but still has not done so.

The two trade lawyers said that the United States was within its rights to discriminate against Chinese solar panels in military procurement.

It's true. We have to exempt the 39 members of the WTO's Government Procurement Agreement from Buy America rules, which includes Korea and other major competitors. These exemptions also apply to an additional 13 countries with whom the United States has so-called "free trade agreements." They would apply to Panama and Colombia if President Obama adopts those Bush-negotiated pacts as his own.

All that's keeping the U.S. Buy America program from giving advantages to Chinese solar panels is a piece of paper (signing the WTO's procurement agreement). China could sign that piece of paper tomorrow, and get those benefits.

Why did U.S. negotiators ever agree to give away the store like that? So much for our bright future of domestic solar panel production.

(Also, the NYT story misrepresents the Buy America legislation. It doesn't prohibit purchases of Chinese solar panels. It just gives a price preference to U.S.-made panels. If Chinese solar panels are as little as six percent less expensive, U.S. authorities can waive Buy American requirements. Note that the Department of Energy has used another exemption - the so-called public interest exemption - to buy foreign made solar cells.)

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Industrial Policy IS Sexy - CRT

The following is recent dispatch from the Climate Reality Tour - a movement building bike tour. My bike partner and I are biking from West Virginia to the U.N. Climate Talks in Cancún to connect the dots between Globalization policies and global climate change. DSC01737

+++ For most folks, there might be nothing less sexy than industrial policy. An abstract government process for deciding how to intervene in the globalized marketplace to support what major industries - often quite polluting ones. It lacks the high-speed flare of bike culture (in which we are awash), the colorful bouquet of community gardening, the human drama of environmental justice struggle.

But green industrial policy might just be what saves the planet. It’s a tragic that it’s sultry allure is lost on us.

We were impressed in our interview with Bill Londrigan, the President of the Kentucky AFL-CIO, how deeply he understood the need for holistic green industrial policy – one that moves rapidly to phase out dirty industry and replace it with green jobs. “Hopefully we can make some rational decisions about where we need to go… to make sure we can evolve to where [energy and industry] aren’t harmful to the environment” Londrigan says. “And the government could play a great role.”

But we are talking more than your typical one-time weatherization jobs and beyond just the renewable energy sector. Green industrial policy can tie the other threads together, and create jobs and healthier communities in the process. As has been discussed, if we shifted our food, transit, and energy policy we could address the injustice and unsustainability in those systems. We can imagine regional bike manufacturing with green energy, and labor-intensive local food systems underwritten by our government. This would be welcome industrial policy to shift from unsustainable centralized corporate status quo.

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Obama's climate solution: undermine green standards abroad?

As we document in a new memo, President Bush's Korea trade deal, and NAFTA-style agreements in general, are the most politically toxic policy since giving Viagra to convicted child molesters.(As Ezra Klein writes, the latter is unfortunately a campaign talking point for some candidates.)

As our day-after election report will show, candidates of both parties are campaigning against unfair trade and offshoring. This includes the few Democrats that could somehow beat the odds and have the party retain the House, or the likely GOP margin makers. And 110 House members, along with the AFL-CIO and Sierra Club, have called for fundamental changes to the Korea deal's harmful deregulatory provisions on financial services and investment.

Somehow, I don't think this is what they had in mind. Mark Drajem at Bloomberg reports that...

The U.S. is asking South Korea to accept American automobile safety and emissions standards in an effort to advance a free-trade agreement, according to three people briefed on the talks.

Under the proposal, if American-made automobiles meet U.S. regulatory standards, South Korea would have to permit the vehicles to be sold in that nation...

Obama campaigned and won on calling for tough auto emissions standards here at home. And the EPA has made some important progress on this front under Obama. However, the U.S. is projected to have lower standards than Korea over the coming years, as Korea will have a 40 miles per gallon proposed standard by 2015, while the U.S. will still only have a 37.8 mpg proposed standard.

Unfortunately, this latest move from the administration is an echo of actions Treasury Secretary Tim Geithner took last year on Europe's (better) hedge fund regulations.

So, it's 2010. The glass is half-to-fully empty on environmental and financial regs here at home, thanks to watering down under industry and Senate pressure. The administration's solution should be to fill up the dang glasses, not try to break other countries' fuller ones through trade deals. We can only hope that this is a testing-the-waters kind of proposal, and that the Obama administration will commit to more robust reform prior to the G-20 in Seoul.

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Follow the Climate Reality Tour!

DSC01484 We’re pleased to unveil an exciting new project: the Climate Reality Tour.

You may have caught an earlier post, but in case you didn't, let's fill you in The Climate Reality Tour is a movement-building road trip to promote global economic policies that are fair for workers and shift away from the climate- and job-destroying status quo. The destination? The United Nations Climate Negotiations in Cancun in late November. And to bring home the sustainability point, we decided to go by bike. Yep, by bike!

With the world in the grips of overlapping global crises – food, economic/financial and climate – the stakes are high indeed. To save the planet requires confronting these crises simultaneously, and that means overcoming the false jobs vs. environment trade-off. In truth, corporations benefit from exploiting both while human beings and the earth suffer.

But this requires political will and resolve far beyond what we’ve seen from either political party, and even many leading civil society organizations. At Public Citizen, we’ve long believed our unsustainable global economic order, as etched in the tomes of the WTO and NAFTA-type trade deals, unfairly pits workers and ecosystems against one another. We’ve decried how the status quo sanctifies the rights or multinational corporations to exploit and destroy – even above the democratic rights of a people determine their own economic and eological futures.

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The Political Genius of Sarah Palin: How One Facebook Post Sparked a Mass GOP Fair Trade Wave

There is some conventional wisdom that the GOP is more united than Democrats in favor of unfair trade deals. See for instance this ridiculous aside from the White House in the New York Times Magazine this weekend:

Rouse and Messina see areas for possible bipartisan agreement, like reauthorizing the nation’s education laws to include reform measures favored by centrists and conservatives, passing long-pending trade pacts and possibly even producing scaled-back energy legislation.

This is silly. Polls show that GOP and independent voters are at least as opposed to these deals as the Democratic base. (See here and here.) And, nowhere in the "everything and the kitchen sink" 48 page GOP "Pledge to America" unity document do they talk about trade or offshoring - showing that there is not a heckuva lot of GOP unity in support of unfair trade.

GOP candidates are responding to the public support for fairer trade. This cycle, we're seeing a much higher number of GOP running on fair trade than in the last two cycles, including pledging to renegotiate trade deals and end tax loopholes for companies that offshore jobs. Some are even attacking their Democratic incumbents' votes against fair trade (a vote for China PNTR, for instance).

But the message that I have seen probably 100 GOP candidates run on in this cycle is attacking the incumbent Democrat for voting for a stimulus bill with Buy America provisions criticized as weak.

Long-time readers will recall that we covered this issue in detail back in early 2009:

Enter Sarah Palin. Despite never having clarified her views on trade policy on the VP campaign trail (or in her previous run for governor of Alaska), Palin raised eyebrows earlier this year when she attacked the stimulus bill for not requiring that all money be spent here in America. Palin wrote on her Facebook wall about the stimulus bill:

“We were promised it would provide “green jobs” for Americans, but 80% of the $2 billion they spent on alternative energy went to purchase wind turbines built in China!”

At the time, I figured that this was just an accidental or not fully thought-through Facebook post. Little did I know that Sarah Palin was an absolute genius whose Facebook post would spark a mass GOP fair trade wave: virtually every GOP candidate across the country is today campaigning on this loophole in the stimulus bill.

So, what would be the solution to this problem? Well, for starters, we'd have to revisit the procurement commitments in the World Trade Organization (WTO) and other unfair trade deals in order to get even close to 100% true Buy America rules in government spending.

Sarah palin Even many free traders feel very strongly that there are moral, environmental and economic reasons to ensure that our tax dollars are used to support local jobs and production. But, as we've long argued, the WTO closes off this key, sovereign policy space. (See our book "States' Rights and International Trade" for more.) Luckily,

But Sarah Palin has pointed out the way forward: rather than falsely assume a bipartisan consensus in favor of Bush's trade deals with Korea and other countries, let's build on the true bipartisan consensus in favor of fair trade in government procurement and in other policy areas.

(Ed note: In the last two election cycles, Public Citizen has brought you detailed analysis of around 100 competitive and open seat congressional races. We found that the role of trade and offshoring increased in 2008 relative to 2006, and by all indications, 2010 will set a new record. Of about 170 races we are tracking, trade is playing in about 90 percent of them (150). That's right, we'll be releasing detailed candidate profiles of over 350 candidates - GOP, Democratic, and some third party.)

(Note: Public Citizen has no preference among the candidates.)

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

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

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

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

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

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

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

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

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New Sierra Club / Public Citizen Report on Fixes to Investment in the TPP

Earlier this week, the Sierra Club, Public Citizen, Institute for Policy Studies, Friends of the Earth and Earthjustice released a new report entitled: "Investment Rules in Trade Agreements: Top 10 Changes to Build a Pro-Labor, Pro-Community and Pro-Environment Trans-Pacific Partnership." You can get a copy right here.

This builds on some of the work done by the various organizations and the Model BIT Subcommittee. The core of the message is simple: trade deals can help lift living standards when public-interest rules aren't being undermined in the process. Obama can make this a reality if he ditches Bush's plans for the TPP, and instead uses the TPP to deliver on his fair-trade campaign promises.

The report also includes particularly detailed remedies to problems like:

  • How do we ensure that foreign investors aren't given greater rights than domestic investors?
  • How do we ensure that Chinese and German companies don't falsely claim nationality from other countries?
  • How do we ensure that investors actually invest and create jobs before having access to special rights under the TPP?
  • How can we safeguard financial transaction taxes from trade-pact challenge?
  • And much much more...
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Economists Don't Count in Enron Attack on Argentina

Economists don't count. At least, that's the conclusion of the arbitral committee that was reviewing the annulment request in the Enron v. Argentina case.

Before I delve into their conclusion, I should mention a bit more by way of (dramatically simplified) history about this case.

As far as most folks are concerned, Enron fell well off the public radar screen when they lost the public's trust, the firm imploded and its leaders were imprisoned.But, almost ten years later, Enron survives as a walking corpse, and has persisted as a legal shell trying to shake down Argentine taxpayers for compensation related to that country's financial crisis in the early 2000s.

Take a step back even further. Argentina's right-wing government in the 1990s (led by Carlos Menem and Domingo Cavallo) pursued what locals called "carnal relations" with the U.S., and with U.S. capital. They privatized electric and gas utilities, auctioned these off (or contracted them out) to private U.S. and European companies, and then signed a series of "Bilateral Investment Treaties" (BIT) that gave these companies outrageous rights not even available to Argentine corporations.

The Menem-Cavallo plan to destroy Argentina's prospects for development succeeded, and the country faced a series of economic crises, culminating in the early 2000s. As part of this response, Argentina's post-Menem caretaker governments took a set of extraordinary measures, including changing the sweetheart terms that companies like Enron got through the privatizations (for instance, getting paid at a fixed dollar-peso exchange rate).

In Enron's morbid second life (now renamed Enron Credit Recovery Corporation - even less clear what Enron produces nowadays), the company took advantage of the U.S.-Argentina BIT to claim that their rights were violated, and Argentine taxpayers should compensate them for not shielding them from the economic and legal fallout of the crisis (fallout which, by the way, regular Argentines had to suffer through in the brutal experience of lost jobs, increasing poverty, and other social ills on the scale of a tragic Great Depression). Under the Bush-Clinton-Bush vision of international investment protection, however, corporations can claim a lifeboat for themselves in these situations, even when ordinary folks are left to drown.

Stunningly, the BIT tribunal sided with Enron in its May 2007 award, and ordered Argentine taxpayers to cough up $106.2 million. Argentina claimed that it should be allowed to use an "exception" in the BIT that (supposedly) allows for countries to deviate from the BIT when their essential security is at stake. The tribunal rejected Argentina's argument. (Believe it or not, five out of five US-Argentina BIT tribunals that examined the essential security claim made the same call on all or some of the government policies challenged by corporations.)

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Pac Rim CAFTA Challenge of Salvadoran Environmental, Mining Safety Policies Given Go-Ahead by Tribunal

Initial Win for Corporation in Trade Agreement Attack on Environmental Policy Poses Complications for Obama Administration as It Tries to Revive Korea FTA

WASHINGTON, D.C. – An international tribunal’s decision to allow a controversial suit against El Salvador under the 2005 Central America Free Trade Agreement (CAFTA) will fuel demands by many in Congress that the Obama administration alter the foreign investor terms in three North American Free Trade Agreement (NAFTA)-style trade pacts inherited from the George W. Bush administration and new pacts under negotiation, Public Citizen said today.

“The fact that an attack like this would even be possible highlights what is wrong with our current trade agreement model,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The same crazy investor rights are in Bush’s leftover trade deal with Korea that President Obama wants to move forward. Unless they fix Bush’s deal, the hundreds of Korean firms operating here would get new rights to skirt our court system and laws and use foreign tribunals to demand taxpayer compensation for laws that they do not like, just like Pac Rim is doing to El Salvador.”

This month, the Obama administration must decide how to proceed with Bush’s leftover Korea-U.S. Free Trade Agreement (FTA), which contains the same CAFTA special rights for foreign investors and private enforcement of them through “investor-state” tribunals. A CAFTA panel for another mining-related investor challenge brought against El Salvador by Milwaukee-based Commerce Group for $100 million was constituted a few weeks ago.

“Today’s ruling just provides another reason why a bipartisan majority of Americans oppose the Bush NAFTA-style trade model and expect President Obama to deliver on his campaign commitments to replace it,” Wallach said.

The CAFTA ruling issued today from the International Centre for the Settlement of Investment Disputes (ICSID) rejected the Salvadoran government’s preliminary objections, which could have led to the dismissal of Canadian-based Pacific Rim’s CAFTA claim. The mining firm is demanding hundreds of millions of dollars in compensation from the government of El Salvador over a dispute about a large gold mine with cyanide ore processing that the corporations sought to operate. The firm never completed the process to obtain a permit to operate the mine and filed its CAFTA case in 2008.

The same provisions in CAFTA that allow multinational corporations to challenge domestic environmental and public health regulations in private, foreign tribunals are also found in the Korea FTA. Obama has called on his negotiators to fix outstanding issues with the Korea FTA, saying that he wants to bring the pact – negotiated by the Bush administration – to Congress for a vote by early next year. However, to date, the administration has stated that it intends only to remedy market access issues for U.S. autos and beef. Labor unions and other civil society groups, as well as many members of Congress, are opposed to the Bush Korea FTA text and have demanded that the extraordinary investor rights and their private enforcement be removed. There are currently 85 Korean-owned multinational companies with about 270 establishments in the United States that would be newly empowered under the Korea FTA to challenge U.S. policies in foreign tribunals if the pact went into effect. There are also hundreds of  U.S. firms operating in Korea that could use the same system to attack Korean public interest laws.

The case is being prosecuted under extremely controversial CAFTA provisions that grant foreign investors expansive new rights to sue governments in foreign tribunals over regulations or government actions that conflict with the pacts’ special rights for foreign investors and that could undermine their future expected profits. These terms are included in all three of the Bush-signed but unapproved trade agreements with Panama, Colombia and Korea that the Obama administration inherited.

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CAFTA Case Challenges Mining Laws

Pit-mine Earlier this week, an arbitration panel at the World Bank heard the first round arguments of the first environmental case under the investor-to-state arbitration mechanism of the Central America Free Trade Agreement (CAFTA) to date.  The case stems from Pacific Rim’s bid to establish a gold mine in the basin of El Salvador's largest river, Rio Lempa.  Pacific Rim planned to use hundreds of tons of cyanide and hundreds of millions of liters of water per year to recover the gold from the ore, threatening the water resources that thousands of people rely upon.  

Initially Pacific Rim possessed a permit to conduct exploration activities near Rio Lempa, but regulations required it to submit a feasibility study and gain government approval before it could begin actual exploitation of the mine.  Although Pacific Rim applied for an exploitation permit, it failed to submit the feasibility study.  In the face of growing opposition, Pacific Rim

never completed a feasibility study necessary to obtain an exploitation permit for its mine and the government did not issue the exploitation permit.

In December 2008, Pacific Rim formally launched a CAFTA claim for hundreds of millions of dollars in compensation, claiming that El Salvador’s actions constituted discriminatory treatment and expropriation of its investment.  CAFTA’s investor-to-state dispute settlement provision is very similar to NAFTA’s investor-to-state provision in which foreign corporations can claim damages if a government action, including environmental regulations, constitutes expropriation of an investment or discriminatory treatment. Under NAFTA, several environmental and public interest laws have been challenged in the United States, Canada, and Mexico (see our page on these cases here for more info).  It seems that trade negotiators did not learn the lesson from NAFTA and included this investor-state provision in CAFTA, opening the door to outrageous challenges to essential environmental laws like we now see in the Pacific Rim case.

On Monday and Tuesday the tribunal at the World Bank heard Pacific Rim and El Salvador wrangle over El Salvador’s preliminary objections to the case proceeding. Lawyers for El Salvador argued that El Salvador was properly following its own mining laws and that these laws apply equally to all mining companies so they cannot be discriminatory.  Lawyers for Pacific Rim, on the other hand, mostly argued procedural questions.  The arbitration panel is expected to render its decision by August 2nd, at which point either the case will be dismissed or hearings on jurisdiction and standing will proceed. A video of the hearings can be viewed here.

You can take action to ask President Obama to exclude these investor-to-state arbitration provisions from future trade agreements here.

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Trade Tribunals: The Canary in the Mine?

“Mining for Profits in International Tribunals,” a report recently released by the Institute for Policy Studies, presents evidence that transnational corporations are litigating for profit in trade tribunals such as the UNICTRAL (United Nations Commission on International Trade Law)  and the ICSID (International Centre for Settlement of Investment Dispute).  In the process, court rulings favoring corporations are undermining countries’ ability to implement important health, environmental and public safety policies.  This gross usage of the tribunals points to the disturbing role that our current trade agreements have in sacrificing the public welfare for the corporation’s profit margin.

The report, which examines the international trade tribunal framework, details how transnational corporations like Chevron and the Pacific Rim are increasingly using tribunals to gain millions dollars in profit by bringing cases against host countries.   Many of these cases evolve around allegations of “lost profit” due to a country’s environmental or health standards. For example, in February 2010 the Canadian mining firm Blackfire Exploration reportedly threatened to sue Mexico due to its closing of an open pit barite mine in Chiapas.  The mine had been ordered to be closed by officials due to its detrimental environmental and health effects. Sources suggest Blackfire threatened officials with an $800 million dollar claim of compensation!

Leaders need to take notice of the trend this report reveals about the larger international trade regime, as these courts are supported by a system of free trade agreements (FTAs) and bilateral investment treaties (BITs). The report concludes by saying there tribunals are “just one illustration of the imbalance in the current rule that govern international investment.”

This phenomenon should be the canary in the mine for today’s leaders and serve as a warning about the need to reform the current trade regime, remedy this imbalance and in the end promote public welfare – not corporate profits.

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Green Job Offshoring Reignites Buy America Debate

Last month, an American University think tank made this startling conclusion: 79 percent of the $2 billion in clean energy grants under a U.S. Treasury/ Energy Department stimulus initiative have gone to foreign - not U.S. - companies. By industry estimates, the program has lead to well over a thousand net job losses in manufacturing.

While President Obama ran and won (and has since advocated) a green industry agenda that creates jobs in the U.S., the AU report finds that the Energy Secretary and American Wind Energy Association stating for the record that the grant program did not have immediate U.S. manufacturing job creation as a major goal.

Yesterday, Sen. Sherrod Brown (D-Ohio) joined Sens. Bob Casey (D-Pa.), Chuck Schumer (D-N.Y.) and Jon Tester (D-Mont.) in calling for a suspension of the grant program until legislation can be passed that makes sure the federal agencies prioritize U.S. job creation. In Schumer's words, "We should not be giving China a head start in this race at our own country's expense."

And as the New America Foundation showed, all of this is part of a longer term "green trade deficit" the U.S. has yet to address.

This latest kerfuffle has reignited last year's debate about Buy America provisions. People need to remember two things: Buy America has been shown to aid U.S. job creation, and neither the stimulus bill nor this latest Brown amendment change long-standing U.S. policy.

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Is There an Outbreak of Amnesia at USTR?

During the presidential campaign, Obama made it clear that he intended to renegotiate NAFTA to include enforceable environmental and labor rights provisions in the main text of the agreement.  The USTR’s 2010 Trade Policy Agenda, released yesterday, entirely lacked any plans to fulfill this crucial campaign promise.

When President Obama was campaigning for office, the only “r” verb he used on NAFTA was “renegotiate,” coupled with a friendly “opt out.” In contrast, USTR's report uses the verbs “review” and “recalibrate,” but then only to refer to actions they promised to take but still haven't taken. On NAFTA’s severe environmental and labor shortcomings, the report only stated that NAFTA’s central oversight body, comprised of officials from each country’s trade negotiating body, would “strengthen its relationship” with the North American Commission for Environmental Cooperation and the North American Commission for Labor Cooperation, which are bodies established under NAFTA whose role is mostly limited to releasing reports about the labor and environmental effects of NAFTA. They have no enforcement capabilities, which Obama heavily criticized.

It’s not like Obama whispered his position on NAFTA to labor unions and environmentalists in private meetings.  He was loud and clear about his plan to renegotiate NAFTA, proclaiming it several times in the televised presidential debates.  In a January 2008 debate, he said that “it is absolutely true that NAFTA was a mistake.” Obama reminded us that his position on NAFTA has been consistent during a February 2008 debate:

MR. RUSSERT: Senator Obama, you did in 2004 talk to farmers and suggest that NAFTA had been helpful. The Associated Press today ran a story about NAFTA, saying that you have been consistently ambivalent towards the issue. Simple question: Will you, as president, say to Canada and Mexico, "This has not worked for us; we are out"? 

SEN. OBAMA: I will make sure that we renegotiate, in the same way that Senator Clinton talked about. And I think actually Senator Clinton's answer on this one is right. I think we should use the hammer of a potential opt-out as leverage to ensure that we actually get labor and environmental standards that are enforced. And that is not what has been happening so far.

That is something that I have been consistent about. I have to say, Tim, with respect to my position on this, when I ran for the United States Senate, the Chicago Tribune, which was adamantly pro-NAFTA, noted that, in their endorsement of me, they were endorsing me despite my strong opposition to NAFTA.

In the Democratic candidates’ debate in August 2007, Obama had a sense of urgency in his voice when he discussed his position on NAFTA:

Continue reading "Is There an Outbreak of Amnesia at USTR?" »

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Justice Beyond Copenhagen

Last night DC was lucky enough to host an all-star panel of global justice activists in a panel discussion called "Evaluating Copenhagen: What it Means for Ecology, Economy, and Equity", convened by leading global justice organizations.

Among the panelists were longtime friends of ours at Global Trade Watch. They included leaders the Global Justice movement like Martin Khor from the South Centre, Maude Barlow from the Council of Canadians, Victor Menotti of the International Forum on Globalization, Chair of the UN Permanent Forum on Indigenous Issues Victoria Tauli-Corpuz, and Gopal Dayaneni from Movement Generation. I'll discuss some highlights below the video.

These experts and leaders left very little doubt that the fight to avert climate catastrophe is the fight for the direction of the global economy; that climate justice + trade justice = true global justice.

If, as panelists noted, the climate negotiations will eventually lead to the rewriting of the global economy then global institutions like the WTO and other unfair institutions of trade and development will have to change dramatically. For decades, social movements have resisted the globalization agenda of the international corporate elite. With the threat of climate change, the world has been forced to pursue fundamental economic transformation. That transformation presents tremendous opportunity, and so comprises the silver lining on the dark, looming clouds of possible climate catastrophe.

Problem is that too few of us in the global north are connecting the dots between the struggles of the global justice movement with the current fight for a fair climate deal.

Continue reading "Justice Beyond Copenhagen" »

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A Year After Implementation of Peru Free Trade Agreement, U.S. and Peru Left with Broken Promises, No New Trade Model

Public Citizen Report Details Decline in Peru’s Labor and Environmental Conditions

On the one-year anniversary of the implementation of the U.S.-Peru Free Trade Agreement (FTA), it has become clear that the hopes and predictions of proponents of the trade deal have failed to materialize, Public Citizen said today. Instead, as critics of the deal had feared, environmental and labor conditions in Peru have deteriorated rapidly since the congressional passage of the FTA in late 2007 and implementation in early 2009. In a brief report released today, Public Citizen outlines some of the broken promises and labor and environmental problems.

The Peru FTA text included several reforms with respect to labor and environmental standards relative to the normal Bush trade pact model, which was based on the North American Free Trade Agreement (NAFTA) and the Central America Free Trade Agreement (CAFTA). These changes were added following a May 2007 deal between the Bush administration and some congressional Democrats.Peru FTA protest

Despite the revised environmental language, the Peruvian government rolled back environmental protections existing prior to the FTA so as to implement the FTA’s foreign investor rights to access forestry, mining and other natural resource concessions. This included access to sensitive Amazonian territories over which indigenous communities had control under pre-FTA Peruvian law. In response to indigenous opposition, including road blocks in the remote northern Amazonia region of Bagua, the Peruvian government dispatched the military, and the resulting confrontation resulted in 34 fatalities – making the Peru FTA the first U.S. trade agreement to result in an immediate body count. 

Despite the revised labor language, in Peru today under the FTA, Peruvian employers can use subcontracting and outsourcing legal loopholes that greatly limit workers’ ability to unionize; child labor and forced labor continue unabated.

“The initial outcomes of the Peru FTA’s implementation demonstrate that major reforms remain to be undertaken if a new American trade agreement model is to be created that can deliver broad benefits to people in the countries involved while protecting the environment,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division.

Starting in 2008, the U.S. House Committee on Ways and Means Chairman Charlie Rangel (D-N.Y.) and Trade Subcommitee Chair Sandy Levin (D-Mich.) protested the Bush administration authorizing the FTA to go into effect despite the García administration failing to implement key labor and environmental reform commitments. A January 2009 letter from Rangel and Levin to Bush U.S. Trade Representative Susan Schwab noted that the García administration adopted new loopholes that could allow enhanced use of company subcontracting to crush unionization drives.

The Peruvian government’s true intentions became clear at a U.S. Chamber of Commerce victory event the
day the Peru FTA was signed into law, when Peruvian President Alan García told the audience of lobbyists for U.S. multinationals: “Come and open your factories in my country so we can sell your own products back to the U.S.” (U.S. Chamber Magazine, December 2007. Accessed July 13, 2009.)

Recent comments filed by unions and other civil society groups concerning the administration’s proposal to initiate Trans-Pacific Partnership (TPP) agreement negotiations focus strongly on the need for major reforms to be made to the trade agreement model used for the Peru FTA. TPP talks, which would include Peru, would provide the Obama administration with the opportunity to implement the president’s trade reform campaign commitments that included the issues unaddressed in the May 2007 deal, and to replace the current damaging Peru FTA text with a new trade pact model.

Read the full report here.

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Minnesota: New Front in Fight for Public Interest, Eh?!

Minnesota is moving to encourage renewable energy by slapping a tariff on coal energy produced in North Dakota, and challenging the global economic order in the process.Carbon-tax

And so opens another front in a much larger battle for the legal and policy space to enact common sense public interest regulations and curb the corporate profit crusade. It's a fight that's vital to the creation of a economic model that averts climate catastrophe and provides dignified living for workers.

Penalizing unsustainable or unethical products, or supporting sustainable and ethical ones, is seen by public interest groups across the globe as a key tool for improving labor conditions and environmental standards. But free-market fundamentalists have long insisted that 'similar' products, in this case electricity, must be treated 'similarly'.

Disgracefully, substantial differences in the ways a product is made are purposefully erased for policy-makers so corporations can hunt for cheaper inputs and thus higher profits. A toy made by a toxic-pollution dumping factory vs. a clean factory? Same. Clothes made with slave labor vs. union labor? Same. Energy generated in a way that fuels climate change vs. renewable energy? Its all the same under corporate free-market logic.

But the corporate types have been winning. They've gotten their faulty logic inscribed in our global trade pacts like NAFTA and the WTO, which provide harsh penalties for transgressions. In so doing they've been able to use the bogeyman of trade sanctions to stifle innovative, quality of life-improving policy tools.

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Political spectrum agrees! WTO must change, for climate's sake

If you opened the Washington Post this morning, you might have been surprised to find an opinion piece on the barriers that World Trade Organization (WTO) rules pose for climate solutions. More surprisingly, the authors were a rather odd couple - our own Lori Wallach (longtime fair trade reformer), and C. Fred Bergsten (longtime trade agreement promoter). Here's a snippet:

There is a real danger that a collision between climate policy and trade agreements could derail two critical goals: controlling climate change and expanding trade.

But this danger is avoidable.

We are an unusual pair of advocates for this message. For a long time, we and our organizations have been on opposite ends of the debate over trade agreements, disagreeing about their effects on economies, livelihoods and domestic regulations.

But we agree on a surprising number of aspects of the climate-change debate and on the related need to overhaul global trade negotiations, which are stalled by disagreements and the worldwide financial crisis.

They go on to warn that "Implementing a treaty on global warming could require new trade rules in intellectual property, services, government procurement and product standards" and "that allowing the WTO adjudication process to handle trade disputes over climate matters is a recipe for discord and impasse."

As Fred and Lori's agreement on so many points demonstrates, the WTO must change, for the climate's sake. Similar notions have been floated from sources like the Center for American Progress, Sierra Club and even the WTO's own director general, Pascal Lamy.

When such a diverse spectrum of trade deal proponents and opponents agree, it's evidence of a path out of what President Obama called the "gridlock" on trade policy. This is a nice parallel to what we've seen in the House of Representatives this year - where New Democrats, Blue Dogs, Black Caucus, Hispanic Caucus, Progressives and even Republicans have come together on the TRADE Act to pave a new way forward on trade. The conversation on trade reform is also happening in houses across America, through the WTOTurnaround house parties.


The opinion piece references a 2008 Public Citizen report on what changes are needed to the WTO to implement then-candidate Obama's climate policies. You can find that report here (PDF).

Lori, in the WaPo piece, also mentions in the piece that "policymakers should fix existing WTO financial deregulation requirements rather than proceed with the Doha-round agenda of even more deregulation." For more info on what changes are needed to the WTO to address the financial crisis, go here.

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GAO Finds that FTAs Include “Limited Efforts to Promote Progress” on Environmental and Labor Rights

The Government Accountability Office (GAO) released a report this month examining American “free trade” agreements (FTAs) with Morocco, Singapore, Chile, and Jordan, to see if the agreements were advancing U.S. commercial interests and strengthening trading partners’ labor and environmental laws.  While the GAO analysis found positive commercial results, the report faulted U.S. agencies for uneven progress on environmental and labor goals and insufficient American involvement in promoting these goals.  The report lamented the “significant and sometimes worsening systematic deficiencies in certain partner nations” and was conducted at the behest of Senator Finance Committee Chairman Max Baucus (D-MT). 

GAO concludes that, “Notably, USTR’s lack of compliance plans and sporadic monitoring, State’s lax management of environmental projects, and U.S. agencies’ inaction to translate environmental commitments into reliable funding all limited efforts to promote progress.” 

GAO’s study confirms that even the minimal provisions promoting labor and environmental rights in FTAs are not being enforced and further illustrates that all current FTAs need to be reassessed, as proposed in the TRADE Act
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Senators Request Climate Change Legislation that Builds the American Economy

A group of forward-thinking senators have come together to ensure that climate change legislation doesn’t disadvantage existing U.S. manufacturers.  Last week ten senators, including Sherrod Brown (D-OH), Russell Feingold (D-WI), and Arlen Specter (D-PA) wrote a letter to the president expressing support for a border adjustment program and other initiatives that would maintain a level playing field for American manufacturing in any climate change legislation. 

The senators wrote, “It is essential that any clean energy legislation not only address the crisis of climate change, but include strong provisions to ensure the strength and viability of domestic manufacturing…Any climate change legislation must prevent the export of jobs and related greenhouse gas emissions to countries that fail to take action to combat the threat of global warming comparable to those taken by the United States.” 

Obama should heed the senators’ call to support responsible climate change legislation because it would not only increase manufacturing opportunities in the United States, but would pressure other countries to do their part to fight global warming.  For more on this, see our fact sheet entitled Trade Agreement Threats to State Climate Change Policy.

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Chilling Policy While the World Burns

Team Obama made some news recently when they went out of their way to criticize a (relatively modest) border adjustment tax measure included in the Waxman-Markey climate legislation as part of last-minute negotiations with Ways and Means trade subcommittee chair Sander Levin (D-Mich.).

For the uninitiated, a border adjustment tax in the climate context is a charge placed on imports from countries that do not have comparable carbon emission reduction schemes. It's intended to ensure that U.S. industries do not lose competitiveness as a result of a domestic cap-and-trade scheme, and that the carbon reduction in the U.S. is not canceled out by an increase in emissions in say China as a result of increased, cap/trade-induced offshoring to that country.

It's political commonsense that a strong border adjustment tax is about the only way you're going to get Midwestern (and many others besides) senators to vote for a climate bill. At a time of high unemployment and manufacturing job loss, it's pretty difficult to ask members to vote for a bill that (without adequate green industrial policy and trade measures) will make matters worse.

That is why it is so surprising that Obama would choose to criticize this measure on the basis of WTO compatibility, as Lori explained here.

What was even more surprising was that the WTO put out a report just days before, appearing to give the WTO seal of approval to border adjustment taxes, something that had Paul Krugman giddy (but which others warned against getting too giddy about). It's odd to say the least that Obama would position himself to the right of the commerce-uber-alles WTO.

Continue reading "Chilling Policy While the World Burns" »

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Climate Policy's Unwelcome House Guest

One of the aspects of climate-change policy rarely discussed outside of very specialized circles is the compatibility of carbon reduction schemes with WTO rules. Indeed, even many in the environmental community don't know about the potential conflicts, and those that do wish like heck that the issue would just go away.

But corporations and pro-corporate think-tanks are paying attention to this issue, and a lot of what they are advocating would take us farther away from a just and sustainable international economic and climate architecture.

Take a recent book by Gary Hufbauer, Steve Charnovitz and Jisun Kim entitled "Global Warming and the World Trading System." In the book, they provide one of the most thorough outlines I've seen yet regarding the potential WTO constraints on climate-change policies, in particular those being debated in Congress and in the lead-up to the Copenhagen summit on climate this December 2009.

They offer up a number of ways of reconciling trade and climate constraints, including

  1. Simply letting WTO members challenge each others' climate measures in the WTO dispute settlement body. The advantage to this approach is that it would help build up "case law" that could settle "once and for all" the question of how restrictive the WTO is with regards to environmental measures. The disadvantage, in the authors' view, is that this "could inspire greater criticism of the already-fragile WTO system" if the panels privilege commerce over climate; "could open the door to widespread opportunistic protectionism and rent-seeking behavior" if the panels privilege climate over commerce; and even a middle ground of balancing the two objectives would not be desirable because those "with a different sense of balance will challenge the outcome as illegitimate." (page 96).
  2. A never-before used Permanent Group of Experts contemplated under the WTO's subsidy agreement could give an opinion as to whether certain climate measures might be considered a subsidy under WTO rules. The disadvantage of this approach is that the opinion would be advisory and perhaps also confidential.
  3. Another option is to renegotiate the WTO, but this would require unanimity among the member countries. (An option they don't consider is for the U.S. to pull out of the WTO.)
  4. WTO members could negotiate a waiver from WTO requirements, with the disadvantage being that a three-quarters majority vote would be necessary.
  5. WTO members could negotiate an optional "code" that certain members could join to allow deviations from WTO requirements on climate reduction policies. While all WTO members would have to approve this code, the authors consider it likely that this approval would be granted, because not all countries would be required to comply with the code's rules. This is the approach favored by the authors.
  6. Nations could ignore the WTO, and simply create a multilateral environmental agreement (MEA) at Copenhagen that conflicts with WTO rules. Obviously, the disadvantage to this approach is that a country that signed onto the MEA would not be immune from a WTO challenge from a country not party to the MEA.
  7. Countries could negotiate a WTO round that would drop tariffs further on products reclassified by their carbon intensity. This is not mutually exclusive from the alternatives outlined above, and in fact a modest version of this is being advocated by the Obama administration, like the Bush administration before it. This is encountering opposition from many development groups that believe that it would deprive developing nations of infant industry protection for green industries.
  8. A final option contemplated in the book is a WTO sectoral agreement on climate-intensive industries, like steel. This model has been used in the past to provide tariff protection for sectors like textiles, one reason the authors seem to dislike this option. Moreover, it would have to be approved by all WTO members.

The problem I see with their idea for a code, and I've just read the book and may not be understanding it correctly, is that it would not be binding on non-code countries. So, what's to keep a non-code country from launching a WTO dispute against a code country? In other words, if the U.S. were in the Code, along with Europe, but China were not, and a U.S. cap-and-trade / green jobs program hurt Chinese "dirtier" steel to the benefit of U.S. "greener" steel, what would insulate the U.S. from a WTO challenge from China? (Given what Paul Krugman reports on Chinese official attitudes on climate in his column today, such an outcome would not seem unlikely.)

We've argued, on the other hand, that the better option is to shrink or sink the WTO. It already has little popular support, as Hufbauer et. al's point 1 shows: anything short of a gutting of the WTO will fuel anger at the institution. The WTO moreover is serving as an obstacle rather than an enabler of finding climate solutions, which inevitably will require messy domestic and international political compromises, as we are seeing currently in the debate around the Waxman-Markey climate bill. The climate emergency means, at a minimum, that the WTO must be kicked to the side, and then renegotiated to be compatible with the climate regime that results from the real give and take between and within nations. After all, even if you like the World Trade Organization, what good is it if there's no world left?

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Pacific Rim Uses CAFTA to take on Mining Regs in El Salvador

Canadian mining company Pacific Rim Corp. has responded to grassroots efforts against its proposed mining project in El Salvador by filing a CAFTA investor suit against the Salvadoran government.  

Communities in northern El Salvador, worried about the environmental impacts of proposed mining projects, campaigned vigorously along with environmental, religious and human rights organizations to hault what would be El Salvador's first large-scale mine in 70 years. They were successful in convincing President Tony Saca to rethink issuing the permit for Pacific Rim's El Dorado mine.

The Miami Herald explains:

President Saca fears mining would cause cyanide contamination of water much in the way it did in the 1950s at the El Dorado mine, the same underground mine in the eastern region of Cabañas which Pacific Rim wants to reopen and expand.

''I won't give any mining exploitation permits because mining is definitively harmful,'' Saca said.

Saca's position has been echoed by his successor, president-elect Mauricio Funes, whose left-wing FMLN party ended 20 years of right-wing rule with their victory in the March elections. Funes will officially take power in June.El Sal protest

El Salvador is not alone in choosing to preserve natural resources over mining projects that do not bring long-term employment and whose profits will flow out of the country. And Pacific Rim is not alone in using NAFTA or CAFTA investor rights to challenge local decisions over mining. The United States is currently fending off a $50 million NAFTA investment suit over California's mining regulations.

Although Pacific Rim is a Canadian company that shouldn't even be eligible to utilize investor rights under CAFTA (an agreement between the United States and five Central American countries), they have found a way around this problem. Pacific Rim Mining Corp. will bring this investment suit through its Nevadan subsidiary, Pac Rim Cayman LLC! As with all NAFTA and CAFTA investor-state cases, the case will be decided outside of domestic courts by a panel of arbitrators.

And all this talk of a Panama FTA, which contains the same kind of investor rights found in NAFTA and CAFTA could makes matters much worse. Panama is home to an estimated 350,000 subsidiaries of foreign mulinational companies. Just as Canadian company Pacific Rim used its Nevadan subsidiary to file a CAFTA investor suit against El Salvador, so could any of the 350,000 parent companies use their Panamanian subsidiaries to take the United States government to task over environmental and other public interest regulations.

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NAFTA: A Familiar Hurdle for California's Environmental Regulators

Last Thursday, California, yet again, proved itself to be a laboratory of innovation, by becoming the first state in the nation to require low-carbon fuels.

The Associated Press reports:

The California Air Resources Board voted 9-1 to approve the standards, which are expected to create a new market for alternative fuels and could serve as a template for a national policy that has been advocated by President Barack Obama and Democrats in Congress.

California state legislator Fran Pavley led the fight to reduce emissions in California by introducing the Global Warming Solutions Act (AB 32) which Governor Schwarzenegger signed into law in 2006. However, the Bush administration stalled implementation of this legislation with a variety of obstacles and it wasn’t until January 2009 that California was given the green light to fully implement the Global Warming Solutions Act.

Now…even after California has cleared the Bush preemption hurdles, officials may have to fight against backdoor international preemption of some of these landmark regulations!Emissions

International Business Times reports that Canadian trade lawyers are beginning to grumble about these new environmental measures possibly violating NAFTA and the WTO.

The measures to slash such emissions would force refiners to consider the carbon footprint of the fuels they produce, a potential blow to synthetic crude upgraded from Alberta's oil sands, whose production emits more carbon-dioxide than conventional oil.

However, the state may have no business imposing such rules on oil produced in other countries, a Canadian lawyer said, and the provisions may violate international trade treaties.

"There's definitely a NAFTA case and a WTO case. There's no doubt in my mind about it," said Simon Potter, a partner at the McCarthy Tetrault law firm whose practice includes trade and competition law.

If a Canadian company were to, as Potter hints, file a NAFTA case, it would be the third major NAFTA investor case launched against California environmental regulations. The first major suit was in response to California’s ban on a harmful gasoline additive MBTE that was leeching into the water system. After five years, the case was finally settled with California’s ban intact. The California Attorney General’s office is yet again helping the federal government fend off a suit brought by Canadian mining company Glamis Gold over California’s mining regulations.

State legislators in California have objected in the past to the kind of backdoor preemption of state regulations encouraged in current trade agreements and have urged the federal government to consult with state legislatures about new trade commitments that could compromise states’ ability to regulate. This legislative session, Assembly Member Nancy Skinner introduced AB 1276 which would add more oversight to the process by which state commits to comply to certain provisions of future trade agreements. 

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Is Your Mudda Necessary?

As the U.S. and international climate debate gears up, we are getting a lot of questions about how WTO compliant is this or that climate policy. My colleague Steve Charnovitz and two co-authors recently released a book called Global Warming and the World Trading System that goes into some depth on this topic.

I hope to release a response to this report in the coming weeks or months, but Steve and his coauthors have an extremely useful appendix that summarizes key WTO cases with relevance for environmental protection. Drawing from this, as well as this win-loss chart and our recent report on the WTO compatibility of Obama's green jobs plans, I conclude that the attempts to defend environmental and other public-interest policies at the WTO have failed most of the time.

By way of a background, the WTO's General Agreement on Tariffs and Trade (GATT) prohibits discrimination against foreign products (even some measures not intended to discriminate), and makes difficult all sorts of other environmental policy implementation besides. That grouplet of trade lawyers that claim that the WTO doesn't represent the most significant international legal tripwire against environmental protection rely on GATT's Article 20 exceptions, which read:

Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures:

(b)        necessary to protect human, animal or plant life or health;..

(d)        necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Agreement, including those relating to customs enforcement, the enforcement of monopolies operated under paragraph 4 of Article II and Article XVII, the protection of patents, trade marks and copyrights, and the prevention of deceptive practices;...

(g)        relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption;

As you can see, defending an environmental measure can be cumbersome. There's that pesky "requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade." Then there's also that funny word "necessary." Is the environment "necessary"? Is my awful plaid shirt that my dad gave me that I am offending my co-workers with "necessary"? What about that after-dinner ice cream? We focus on some stats on the necessary test in this post.

It turns out that meeting this "necessary" hurdle is very difficult. According to Joost Pauwelyn, GATT panels never deemed environmental or public-interest policies "necessary" prior to the establishment of the WTO. As we list in our report in footnote 130, there have been 11 post-95 WTO cases where Article 20 exceptions have been invoked.

So, out of 11 cases pre- and post-95 where the "necessary test" was invoked, it was only accepted twice. Of the 15 cases listed here, the overall exception was only accepted twice. So environmental and other GATT exceptions failed 80-87 percent of the time.

If you have comments, or know of other cases where the exceptions (and specifically ones where the "necessary" test is relevant), please let me know. This is what I'm cramming together from memory and these few sources.

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"I want the WTO to tell us we can't do this... because then we won't have a WTO."

Josh Holland had a great piece on Alternet a while back that talked about how the WTO will need to be shrunk, sunk or otherwise renegotiated to allow Obama's green jobs plans to go forward without challenge or sanction. He does fresh reporting on an issue we've been raising for a while:

It's a story that's gotten little attention during the campaign. The traditional media have found the time to analyze Sarah Palin's wardrobe in great detail, take a hard look at whether or not the fact that Joe Biden was raised in Scranton, Penn., will win over white folks from the "Heartland" and ponder the all-important question of whether a mainstream, centrist Democrat like Barack Obama is in fact a crypto-Maoist. But they haven't bothered to point out that much of what both the Democratic and Republican nominees are promising on the campaign trail would likely be found "illegal" according to the rulings of shadowy trade tribunals that have the power to impose daunting financial penalties against the U.S. government if it were to stray from the economic orthodoxy known as "neoliberalism."

That's what "free trade" deals are about: limiting by treaty the policy space in which lawmakers can operate. As such, both of the presidential candidates are boxed into a cage of their respective parties' creation. It's the dirty secret of the 2008 campaign.

Recently, AlterNet asked Van Jones, founder of Green For All and author of The Green Collar Economy, about this issue, and he responded with defiance. "I want the WTO to tell us we can't do this," he said, "because then we won't have a WTO. I want the free traders to stand up in front of the world and explain to Americans why some people are going to tell you that you can't have clean energy and you can't have your home retrofitted (with American-made products) because it is more efficient for it to be made in Asia or Germany, that you can't bring Detroit back to build wind turbines. I want the free traders to defend having an overseas body to declare this agenda illegal. I want that fight."

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With Begich, we're up to 41 new fair traders!

It was just announced that Anchorage mayor Mark Begich (D) defeated Sen. Ted Stevens (R) for the Alaska Senate seat. Begich made strong fair-trade statements on his website, and his win brings our total new fair traders in Congress up to 41, or a net shift of 33, in the 2008 elections. This means that the 2006-2008 shift is up to 70.

With at least six races still uncalled, there may still be changes to our total count. But you can find the latest 58-page report and 37-page appendix on our website, which includes the Alaska races. As we state in our newly updated report:

In conservative Alaska, Democrat Mark Begich defeated Republican incumbent Sen. Ted Stevens with a platform that called for trade reform. Of course Stevens’ ethics scandal was the prominent focus of the campaign in the closing months. However, the trade issue played with Alaska’s conservative voters in a similar way as seen elsewhere in the west. Alaska’s economy bears little resemblance to that of the Rustbelt. Employment is2680172657_97160348a6 concentrated in service and extractive industries that are rarely affected by imports in the same way foreign textile imports might affect that domestic industry. But concerns over local and national control of policy are important, and in fact Stevens and his House colleague Rep. Don Young (R-Alaska) had a history of opposing the WTO and other trade policies based on sovereignty concerns. Neither, however, had voted the fair-trade position since 2003.

Begich’s campaign sensed an opening, and his website said
, “NAFTA has not worked as predicted, costing an estimated 1 million American jobs. NAFTA, CAFTA and the bilateral free trade agreements negotiated by the Bush administration have helped big business while hurting middle class Americans. Mark believes fair trade policies should include meaningful and fully enforceable consumer, labor, environmental and human rights protections. He favors a tax code that rewards companies for creating jobs in America, not that take those jobs abroad. International trade can be good for Americans, and is a vital part of Alaska’s economy, but it needs to serve middle class families, not just multi-national corporations.”

[Thanks CitizenChunk for taking the awesome photo. Click here for some more great ones.]

Word of the fair-trade election victory is getting around. Joseph Schatz at CQ has written about it, Bridges over in the EU ran something on it, David Sirota has written about it his latest column and elsewhere, and Bill Lambrecht at The St. Louis Post Dispatch also weighed in. In a wire story by Jim Abrams that is making the rounds at the NYT, WP, IHT, Guardian, Newsweek and elsewhere:

The election of Barack Obama has delivered a decisive victory to "fair traders," mainly Democrats and their allies who for years have contended that the free-trade policies of past administrations were recipes for American job losses and environmental degradation.

Obama's win marks the first time in modern American history "that a candidate advocating a shift in our trade policies in a decisively pro-worker, pro-consumer, pro-environment direction has been elected president," Public Citizen's Global Trade Watch, an advocacy group that is critical of free trade agreements, said in a report.

On the other side, Dan Griswold, director of the center for trade policies at the pro-trade Cato Institute, was equally stark in his assessment: "We are going to see the U.S. retreat from its long-standing leadership in the global economy."         

Of course, there is both life and leadership after the WTO model. One way that climate groups are suggesting Obama could claim the mantle of global leadership - and rebuild significant good will in developing nations - is to lead a global effort to establish a "green carve-out" in WTO rules that would allow countries to pursue cap-and-trade programs, green subsidies and procurement, and other carbon-reducing policies without being subject to WTO challenge or sanction.

A similar move has already been made on public-health matters in 2001. As we suggest in a recent fact sheet, an Obama-led green overhaul of the WTO would be one way to stop to avoid the planetary heat, and stop the WTO chill... not to mention a great first step on global leadership by putting climate ahead of commerce.

[UPDATE: For more on this issue, we've re-released our analysis of how WTO rules will need to be overhauled to accomodate Obama's climate and health plans. See our new press release after the jump.]

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Flipper attacked again

A few weeks ago, Mexico requested WTO consultations with the United States at the World Trade Organization. What’s at issue this time around? The “dolphin safe” tuna label…again!Dolphin

You may have thought this was settled back several years ago when Congress, in response to another trade dispute under GATT, gutted the “dolphin safe” labeling requirements. Now the dispute is back, and it’s even more serious this time because a ruling by the WTO would be binding.

Check out this article for a full history of the case.

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VT Legislator Reacts to Interference on E-waste Bill

Ewaste_2 On July 3rd, we posted that two state bills in Maryland had seen interference from the People's Republic of China (PRC) before they had the opportunity to come to a vote, cited as "barriers to trade" in conflict with the U.S. commitments under the World Trade Organization (WTO). Since then, we have been updated on the developments of a similar case in Vermont and wanted to share.

State Senator Ginny Lyons (D-Chittenden County) recently issued a statement on August 12th responding to the correspondence she received from the PRC regarding her bill on electronic waste. This letter from the Chinese Government also referenced U.S. commitments under the WTO as reason for asking Lyons to "cancel" or "revise" her bill. To which Sen. Lyons responds:

"The People's Republic of China questions the authority of the Vermont legislature to enact legislation to protect human life and the environment. This attempted interference by the People's Republic of China in the democratic process in Vermont is alarming and threatens basic principles of our system of government. Common sense solutions to health issues at the state and local level should not be subject to international pressure."

She stresses that, "This is part of a disturbing trend toward undermining states's rights. It's simply not OK for other governments to feel that they have a right to intervene in our state legislative process in this way. It wouldn't matter whether the bill addressed by the Chinese government was about health care, workers' benefits, land use permitting, or in this case, electronic waste recycling, the underlying principle is the same: respect for democratic decision-making. And so, we have to let folks in Washington DC and in Beijing know that this is an unacceptable intrusion."

This statement follows the unanimous passage of Sen. Lyons' resolution on this issue by the National Conference of State Legislatures (NCSL) Labor and Economic Development Committee at their annual meeting in July. The resolution asks that, at minimum, USTR issue a statement to NCSL "affirming that states’ abilities to pass laws and regulations protecting human health and the environment should not be abridged, and that USTR will aggressively defend states’ regulatory powers as a matter of U.S. federalism."

The Forum on Democracy and Trade released a preliminary analysis of the allegations by the People's Republic of China claiming that Sen. Lyons' bill is inconsistent with the WTO Agreement on Technical Barriers to Trade (TBT). The analysis finds the following:

"The TBT Agreement, which states that "Members should ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade." Under this strict "necessity test," trade values arguably trump other public policy values unless there is no conceivable alternative policy that is less burdensome on trade."

And states in conclusion:

"As illustrated by this event, other countries could and are beginning to use the trade system to apply pressure to state legislatures and to impact the state legislative process. Since trade promotion authority has expired, states see an opportunity to evaluate the process for providing input on trade issues and to improve federal-state communication. A new system for improving communication between states, USTR, and Congress should be a strong priority for the next Congress and President to ensure that our democratic system of government is protected."

We wholeheartedly agree with the Forum's conclusion and hope that state legislators will act on this opportunity to improve their role in the process. (If you are a state legislator and would like to get involved in a working group devoted to these issues, please email:

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Chevron to USTR: help us kill more children


Chevron wants the United States to suspend trade preferences with Ecuador, because Ecuador decided to take exception to Chevron, you know, dumping billions of gallons (that is not a typo) of toxic waste in the Amazon rainforest, leading to cancer and deformities among indigenous peoples in the area.

Ecuador is demanding that Chevron pay between $8 and $16 billion to clean up the rainforest. Chevron's reponse? "We can't let little countries screw around with big companies like this—companies that have made big investments around the world." And then they went crying to USTR. This rather stunning quote from a Chevron lobbyist was written up in an excellent Newsweek article.

Democracy Now has more, including a discussion with the author of the above-linked Newsweek article, and through Just Foreign Policy, you can take action to urge USTR to reject Chevron's request.

As usual, sums it up: "Cartoonishly Evil People Run the World!"

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Couldn't you have told me that 30 years ago?

Corporate lobbyists and ideologues have spent the past three decades in a frenzy trying to force countries to lower tariffs and deregulate their economies. Apparently, the brilliant economists involved in this exercise didn't realize that dangerously globalized supply chains require intensive usage of non-renewable energy sources. According to a front-page NYT story by Larry Rohter, which documents how Ikea and other companies are opening or reopening their U.S. manufacturing outfits:

Decisions like those suggest that what some economists call a neighborhood effect — putting factories closer to components suppliers and to consumers, to reduce transportation costs — could grow in importance if oil remains expensive. A barrel sold for $125 on Friday, compared with lows of $10 a decade ago.

“If prices stay at these levels, that could lead to some significant rearrangement of production, among sectors and countries,” said C. Fred Bergsten, author of “The United States and the World Economy” and director of the Peter G. Peterson Institute for International Economics, in Washington. “You could have a very significant shock to traditional consumption patterns and also some important growth effects.”

The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times.

The study, published in May by the Canadian investment bank CIBC World Markets, calculates that the recent surge in shipping costs is on average the equivalent of a 9 percent tariff on trade. “The cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” the report concluded, and as a result “has effectively offset all the trade liberalization efforts of the last three decades.”

This is info that would have been useful before center-left political parties starting imploding over
their leaders' support for deregulatory policies against the interest of their constituents, not to mention the government waste on USTR salaries. Can we recall our Geneva delegation yet?

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First WTO post-Y2K Climate Challenge?

Our recent report looked at the WTO preemption issues surrounding green and climate policies, noting that:

Cap-and-trade programs could be challenged under existing WTO rules. Indeed, this is far from a hypothetical problem: in January 2008, the Bush administration pressured the European Union to drop the import provisions of its cap-and-trade program. According to Inside U.S. Trade,

“Backing U.S. opposition to the proposal is the possibility it could retaliate under the WTO
…Under existing jurisprudence on the General Agreement on Tariffs and Trade (GATT),
tariffs imposed based on the means of production constitute WTO violations. Therefore, the EU proposal, which like tariffs also would have increased the price of imports, could in the end constitute a WTO violation because it was directed to products that used large amounts of carbon in their production.”

In response, the European Commission’s new package of carbon control policy package “did not contain a proposal opposed by the U.S. to require European importers of carbon-intensive products to buy carbon allocations in the EU’s cap-and-trade system.” Instead, the new plan shelves the import aspects of the plan “in favor of a study to be completed in 2011,” thereby postponing vital international policy innovation in that area for at least several more years.

According to today's NYT, it looks like the first major post-Y-2k climate policy challenge at the WTO is just around the corner.

The European Union reached a landmark agreement Thursday to cap emissions from aircraft, raising the stakes in an increasingly ferocious battle with the United States over how to regulate global greenhouse gases.

In the first requirement of its kind, all airlines arriving or leaving from airports in the European Union would be required to buy pollution credits beginning in 2012, joining other industrial polluters that trade in the European emissions market. That includes non-European carriers like American Airlines and Singapore Airlines.

Including airlines in the system is the boldest move yet by Europe to stamp its environmental policies on the rest of the world...

American officials warned that the requirements probably would be illegal under the convention governing international civil aviation.

“The mandatory application of the European Emissions Trading System to U.S. airlines and airlines of other non-European countries is, we think, both contrary to international law and ultimately unworkable,” said Robert Gianfranceschi, a spokesman at the United States Mission to the European Union in Brussels...

The transport association spokesman, Mr. Concil, said the costs to the airline industry of buying permits to comply with European emissions regulations would be more than $4 billion. Imposing new, costly rules on airlines was “incredible” at a time when the industry is expected to lose more than $6.1 billion this year, he said.

As the article notes, it's possible that this pact could come up under non-WTO agreements. But it's huge money. We'll be staying tuned.

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Who Likes to Rock the FDI Party? Kevin G Likes To Rock the...

We've written about our bud Kevin Gallagher of the Global Development and Environment Institute many times before. After an amazing book out last year with Lyuba Zarsky, he has another one out on foreign direct investment and sustainable development that's getting the book event treatment over at the Carnegie Institute this Thursday in DC. If you're around, it'll be the best FDI party around. Details after the jump...

Continue reading "Who Likes to Rock the FDI Party? Kevin G Likes To Rock the..." »

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NAFTA Peru Expansion Didn't Solve Peruvian Forestry Problems, I

The results are pouring in: when Congress voted to pass last year's NAFTA expansion to Peru, they effectively gave up leverage over a government determined to rip apart the Amazon and its biological occupants.

The FTA negotiations began in 2004. At that time, there was exploration contracts with multinational extraction companies for eight oil blocks. Then, in 2006, as negotiations were wrapping up, that number jumped again; slowed down while Congress was considering the FTA in 2007; and now has jumped up by another eight, bringing to total to 40 blocks. Another 14 are slated to be signed by 2009. According to ENS:

"Oil and gas blocks now blanket nearly 75 percent of the Peruvian Amazon," said Dr. Matt Finer, staff ecologist at Save America's Forests in Washington, DC, who is now in Peru. "That is over 123 million acres of megadiverse rainforest, roughly the size of California and Maine combined."...

"Hydrocarbon blocks now overlap 20 protected areas," said Cesar Gamboa, president of the Peruvian nongovernmental organization Derecho, Ambiente y Recursos Naturales.

"Thirteen of these protected areas preceded creation of the oil blocks and the overlap is illegal due to the lack of compatibility studies required in the Protected Areas Law," Gamboa said...

An analysis by Save America's Forests indicates that 58 of the 64 blocks overlay titled indigenous lands and 15 overlap the territories of indigenous peoples in voluntary isolation.

Then, Peruvian President Alan Garcia unilaterally modified the institutional structure that slowed down destruction of the rainforest, only months after Congress approved the trade deal. According to IPS:

Legislative decree 1,015, approved by García on May 20, makes it possible for indigenous communities in the country’s highland and jungle regions to authorise the sale or lease of communal land to private investors with the votes of just 50 percent plus one of the members of the community assemblies.

The new law modifies legislation on private investment that required the consent of two-thirds of the qualified members of the village assembly to sell or lease land.

Now the votes of only a simple majority in village assemblies, who no longer must be duly qualified members, are needed...

The entry of private investment has come hand in hand with the formal land titling and break-up of communal property, and many indigenous peasants in the coastal regions have been forced to pawn their land titles to obtain loans, given the lack of state support for improving the productivity of their farms, said [one activist]...

Some warn that the decree opens the door to manipulation of communal assemblies.

"The common practice of many companies has been to foment the creation of communal organisations parallel to the official ones, and to co-opt some of the local leaders, which has enabled them, in many cases, to destroy the social fabric and impose their own decisions," said lawyer Javier Jahncke with the non-governmental Ecumenical Foundation for Development and Peace (FEDEPAZ).

Indeed, the action by the nominally socialist Garcia has brought together the left, the right, and indigenous groups in Peru to oppose the presidential power grab, and the multinational land grab. We'll look at more of this story today and next week.

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Corporate takeover of everything department

And the food crisis roils on, thanks to NAFTA and WTO's neoliberalization of the food supply. Mexican farmers continue to be displaced in the wake of NAFTA:

“We migrate because we don’t think there are options,” Mr. León said. “The important thing is to give options for a better life.”

Viewed against the backdrop of rising food prices in a global marketplace, Mr. León’s fight to keep farmers from abandoning their land is much more than a refusal to give up a millennial way of life.

As Mexico imports more corn from the United States, the country’s reliance on outside supplies is drawing protests among nationalists, farmers’ groups and leftist critics of Mexico’s free trade economy. Earlier this year, as the last tariffs to corn imports were lifted under the North American Free Trade Agreement, farmers’ groups marched against the accord in Mexico, asking for more aid.

And the few that made it across the border are now getting slammed by ICE stings. And has anybody noticed that the destruction of Mexico's traditional economy and import substitution schemes have not led the way to more efficiency, but greater instances of narcotrafficking and narcoterrorism? I mean, seriously, we seem close to having a failed state on our borders.

In other news, apparently the Supreme Court is so taken over with corporate concerns that they can't even hear international human rights cases any more, most recently in the case of apartheid in South Africa. And though it's not directly trade related, I thought this piece on the Senate compromising on banning menthol cigarettes showed an outrageous form of health and environmental racism:

Menthol is particularly controversial because public health authorities have worried about its health effects on African-Americans. Nearly 75 percent of black smokers use menthol brands, compared with only about one in four white smokers.

That is why one former public health official says the legislation’s menthol exemption is a “cave-in to the industry,” an opinion shared by some other public health advocates.

“I think we can say definitively that menthol induces smoking in the African-American community and subsequently serves as a direct link to African-American death and disease,” said the former official, Robert G. Robinson, who retired two years ago as an associate director in the office of smoking and health at the Centers for Disease Control and Prevention.

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McCain self censors from telling Americans what polls say they want to hear

Pew Center has a new poll out in response to this question (hat tip to Deborah James for the link):

In general, do you think that free trade agreements—like NAFTA, and the policies of the World Trade Organization—have been a good thing or a bad thing for the United States?

Bad thing: 48%

Good thing: 35%

In other news, Sen. John McCain (R-Ariz.) has come out in favor of punitive tariffs on climate change laggards, but according to the NYT:

In the prepared text of his speech, e-mailed to reporters on Sunday night and Monday morning, Mr. McCain went so far as to call for punitive tariffs against China and India if they evaded international standards on emissions, but he omitted the threat in his delivered remarks. Aides said he had decided to soften his language because he thought he could be misinterpreted as being opposed to free trade, a central tenet of his campaign and Republican orthodoxy.

As we noted a couple of months ago, McCain's (and Obama's and Clinton's) climate change policies are seriously limited by his beloved "free trade" deals.

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Redundant trade, Larry Summers, NAFTA

This piece in the Times featured an issue that we will be doing a report on soon: redundant trade.

Cod caught off Norway is shipped to China to be turned into filets, then shipped back to Norway for sale. Argentine lemons fill supermarket shelves on the Citrus Coast of Spain, as local lemons rot on the ground. Half of Europe’s peas are grown and packaged in Kenya...

Increasingly efficient global transport networks make it practical to bring food before it spoils from distant places where labor costs are lower. And the penetration of mega-markets in nations from China to Mexico with supply and distribution chains that gird the globe — like Wal-Mart, Carrefour and Tesco — has accelerated the trend.

But the movable feast comes at a cost: pollution — especially carbon dioxide, the main global warming gas — from transporting the food.

Under longstanding trade agreements, fuel for international freight carried by sea and air is not taxed. Now, many economists, environmental advocates and politicians say it is time to make shippers and shoppers pay for the pollution, through taxes or other measures.

“We’re shifting goods around the world in a way that looks really bizarre,” said Paul Watkiss, an Oxford University economist who wrote a recent European Union report on food imports.

He noted that Britain, for example, imports — and exports — 15,000 tons of waffles a year, and similarly exchanges 20 tons of bottled water with Australia. More important, Mr. Watkiss said, “we are not paying the environmental cost of all that travel.”

Larry Summers had a must-read piece in the FT:

growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered. As one prominent chief executive put it in Davos this year: “We will be fine however America does but I hope for its sake that it will cut taxes and reduce regulation and put more pressure on young people to study in the ways that are necessary for it to be able to keep competing successfully.”

The chief executive was sincere and he captured an important truth. Even as globalisation increases inequality and insecurity, it is constantly and often legitimately invoked as an argument against the viability of progressive taxation, support for labour unions, strong regulation and substantial production of public goods that mitigate its adverse impacts.

In a world where Americans can legitimately doubt whether the success of the global economy is good for them, it will be increasingly difficult to mobilise support for economic internationalism.

And Lori makes a point in the WSJ that a lotta folks have been missing:

Regardless of the ebb and flow of concern over free trade, some globalization critics say the dangers to the accord are real.

Next year's North American summit would be "an opportune time for a President Obama or a President Clinton to follow through on their pledge to renegotiate," said Lori Wallach, director of Public Citizen's Global Trade Watch division. She said either leader would be "under enormous pressure to make some changes in those agreements," in part because of the potential impact on domestic-policy priorities such as addressing climate change or the health-care crisis.

"The real issue that could threaten [Nafta] isn't politics, but the agreement's actual outcomes," not just for workers in the U.S. but also in Mexico in particular, she said. "People don't have a problem with trade -- it's this version of the rules."

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Getting into the mud and blood bath and rising sea levels

  • It seems like Hillary may have also been talking to the Canadians on NAFTA.
  • Reading the NAFTA-memo on Goolsbee more closely, we were struck by this passage: Goolsbee "again cautioned that much of the current conversation in the US about the negative impact of free trade is not aimed at Canada. He said the 'blood bath' is over expanding free trade to countries like Peru and Korea." Hmmm... is that a reference to the Peru NAFTA expansion that Obama and Clinton supported? As I recall, a perfectly avoidable blood bath.
  • The Bush administration is using the Colombia-Ecuador-Venezuela tiff as an excuse to further push the Colombia FTA. As BoRev.Net and Just Foreign Policy show, moreover, it looks like Bush and the candidates may need to take a step back from the unflinching support of Colombia in this spat. 
  • The Bush administration and climate change deniers in Congress are saying that not only should we be scared of the WTO preempting our domestic climate change proposals, but also of retaliation from unnamed foreign countries. Schwab confirms some of our findings from our report, but seems to be using the WTO as an excuse to tamp down rather than ramp up climate action. Bad politics, bad policy...
  • Disclosure: Global Trade Watch has no preference among the candidates.
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New report: Clinton, McCain, Obama - can we go a little deeper?

As long promised, we published a report today that Mary Bottari and I wrote that looks in detail at the Clinton, McCain and Obama plans on health care and climate issues. Our focus is on what changes need to be made to the WTO, NAFTA, and other trade pacts to allow for needed policy space in this area. Here's the press release for the report:

To Implement Domestic Campaign Policy Priorities on Health Care and Global Warming, Future Presidents Must Alter Existing U.S. Trade Commitments

New Public Citizen Report Identifies Changes to WTO, NAFTA Rules Needed to Facilitate Candidates’ Proposals on Health and Climate

WASHINGTON, D.C. – Public Citizen today identified changes needed to World Trade Organization (WTO) rules and the investment provisions of the North American Free Trade Agreement (NAFTA) to implement a dozen of the presidential candidates’ key health and climate policy proposals.

The changes were detailed in a report, “Presidential Candidates’ Key Proposals on Health Care and Climate Will Require WTO Modifications, Overreach of WTO Highlighted by Potential Conflicts with Candidates’ Non-Trade Proposals,” released today, available at

“Growing public ire about our current trade and globalization policies’ damage to Americans’ economic prospects has played an enormously important role in this election, with most candidates committing to reform NAFTA,” said Lori Wallach, director of Public Citizen’s Global Trade Watch division. “But candidates and voters have little idea that some of the candidates’ domestic policy priorities on health care and climate change could be limited by the overreach of so-called trade agreements like the World Trade Organization. The need for a comprehensive overhaul of the WTO could not be more urgent.”

Although they have nothing to do with trade, key health care cost containment proposals on the creation of health insurance risk pooling mechanisms, reduction of pharmaceutical prices and electronic medical record-keeping, a proposal to expand coverage by requiring large employers to provide health insurance and a proposal to establish tax credits for small employers as an incentive to provide health insurance fall within WTO jurisdiction. In addition, proposals that address climate policy, such as increasing CAFE (Corporate Average Fuel Efficiency) standards, banning incandescent light bulbs, establishing new regulation of coal-fired electric plants and establishing national renewable portfolio standards (RPS), green procurement proposals and green industry subsidies come under the jurisdiction of existing U.S. WTO commitments.

“Corporate lobbyists, previous U.S. presidents, and ‘free market’ think tanks worked hand-in-hand to lock in corporate privileges on health care, energy and other domestic policies and shield them from small ‘d’ democratic reforms of the kinds proposed by Clinton, McCain and Obama,” said Todd Tucker, research director for Public Citizen’s Global Trade Watch division and an author of the report. “Now is the moment presidential candidates must stand up for their important domestic platform priorities and commit to renegotiate the WTO and other flawed trade deals.”

Moreover, the candidates haven’t addressed the need to renegotiate other provisions in trade deals like the WTO, NAFTA and other NAFTA-style trade deals that severely limit future presidents’ policy space to enact legislation on non-trade issues.

“Trying to work within the tiny policy space permitted by existing WTO rules would result in the challenges surrounding America’s health care debacle and the global climate crisis being defined so narrowly as to ensure real redress is impossible,” said Wallach. “The candidates must reject corporate calls for watering down their proposals and instead emphasize opening up the much-needed policy space to provide real solutions to pressing domestic concerns.”

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Trade back-and-forth in OH

Disclosure: Global Trade Watch has no preference among the candidates.

Clinton and Obama's showing in last night's Democratic debate gave us a few more glimpses into the candidates' plans for redirecting our trade policy. The highlight of the debate was both candidates' commitment to renegotiate or threaten to opt out of NAFTA. Though neither would commit to pulling out of NAFTA in the six month time frame, this is still a dramatic statement that we have not seen from either of the candidates previously. For more background on their stances, check out David Sirota's primer from yesterday.

This news will come as a great big sigh of relief for many Americans who have seen their lifestyles turned upside-down by our misguided trade policies - including NAFTA and almost a dozen clones that we've seen materialize since.

The CNN Political Ticker notes the moment and Ohio Senator Sherrod Brown's reaction:

Both Hillary Clinton and Barack Obama were asked if, as president, they would opt out of NAFTA in six months. Both candidates said they supported restructuring NAFTA and would use the threat of opting out of the agreement as a negotiating tool.

"They said it exactly right," Brown told CNN. "I want trade and more of it. I want it under different rules."

Brown voiced loud opposition to NAFTA during his 2006 Senate campaign, in which he unseated GOP incumbent Mike DeWine.

"If we say we want a different NAFTA," Brown continued, "they will negotiate, always with the threat of opting out if they don't, and that's exactly the right position. And I was thrilled, because I have not heard either of them specifically say that and they answered the question directly."

MLIVE, a Michigan news service, says that their state sympathizes with "Ohio's special beef":

Until now trade generally has been a low-profile issue in the long Democratic campaign. But Ohio has a special beef with U.S. trade policy, which union activists and many Democrats blame for a steep manufacturing decline.

Only Michigan has suffered a greater loss of manufacturing jobs than the 265,000 (23.7 percent) Ohio over the past seven years, mostly as a result of corporate outsourcing and plant closings. It's the worst jobs loss in Ohio "since the end of the Great Depression," according to the American Manufacturing Trade Action Coalition, a manufacturers association.

"Trade is an issue here," said Amy Hanauer, executive director of Policy Matters Ohio, an issue think tank, "and NAFTA is a proxy for trade. ... It may hurt Hillary Clinton."

The political consequences were made abundantly clear two years ago when Democratic Rep. Sherrod Brown unseated Republican Sen. Mike DeWine handily, chiefly by denouncing U.S. trade policy.

The New York Times reported this morning from the famous Midwest stumping-ground:

“We’re sick and tired of the empty promises and the same old story line about Youngstown and the mills,” said Phil Kidd, 28, a blogger and community activist who has sold 10,000 T-shirts that shout “Defend Youngstown” over the image of a steelworker wielding a sledgehammer. “The problem is that this is a rubber-stamp Democratic area so they know it’s almost a guarantee they’re going to get our vote. We just have to hope that this time whoever wins won’t forget about us.”

Both Democratic candidates have promised to remember, kicking off their Ohio campaigns here with fiery populist speeches they hope will appeal to the 100,000 Democratic stalwarts who live up and down the Mahoning Valley, the cradle of the Ohio steel industry and a place that has been shedding union-wage manufacturing jobs for the last 30 years...

Mr. Obama has also honed his message to tap into the anger and despair heightened by growing unemployment and the foreclosures that have felled 79,000 homeowners in the state. In a speech at Youngstown State University, he told the crowd he would give generous tax breaks to the middle class, establish a $10 billion fund to help homeowners facing foreclosure and provide incentives to companies that invest in struggling cities.

“Everywhere I go — not just in Youngstown, but everywhere — you see people who have worked in a plant for 20 years, put their heart and soul into building profits for shareholders,” he said. “Suddenly, the rug’s pulled out from under them; the job’s shipped overseas. They don’t have health care. They don’t have a pension. They’re trying to compete with their teenage kids for a job paying seven bucks an hour at the local fast-food joint.”

If the after-work crowd at the Golden Dawn tavern is any guide, Mrs. Clinton still enjoys solid support from the men whose rough hands and plain-spoken ways put them in the coveted demographic that analysts say hold the key to winning Ohio next Tuesday.

Many of the men who were sitting at the bar and salting their goblets of beer had clearly absorbed Mrs. Clinton’s contention that her opponent is too inexperienced to be president.

From The Washington Post, an elaborate lie-detector scale:

You would not think so from the way they have been attacking each other, but Clinton and Obama are not all that far apart on NAFTA. They both believe in free trade, but they both contend that the United States has gotten a bad deal from the way NAFTA and other trade deals have been enforced. Both candidates have used quotes selectively to slam each other. Two Pinocchios apiece.

ONE PINOCCHIO: Some shading of the facts. TWO PINOCCHIOS: Significant omissions or exaggerations. THREE PINOCCHIOS: Significant factual errors. FOUR PINOCCHIOS: Real whoppers. THE GEPPETTO CHECK MARK: Statements and claims contain the truth, the whole truth and nothing but the truth.

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Green jobs, soft bigotries, big opportunities

Once in a rare while, an idea actually takes the nation by storm. It may not necessarily be a new idea, but it is articulated in a new and exciting way that captures the political imagination. Such an idea is the "green jobs" agenda, which attempts to conceive of a move to a green economy in a way that actually increases jobs and income, rather than taxing us back to preindustrial times. My new buddy Susan Helper described this set of ideas fairly concisely in a new paper for the Economic Policy Institute. Among the arguments she presents and summarizes:

  • A 2-3 degree Celsius increase in temperature could lead to mass species extinction and flooding; in order to avoid this and other consequences, carbon emissions (which lead to global warming) in developed countries must be reduced 80%. While this sounds very daunting, and indeed it is, there are relatively small investments that could be made in energy efficiency and renewable energy that can take us there. Thus the green jobs agenda.
  • At the same time, U.S. workers are hurting. Less than 10% of the workforce is currently in manufacturing, and key industries like the tooling industry are nowhere near where they need to be to move to a green economy. Thus, greening could potentially lead to more offshoring - not the nail in the coffin that the American worker needs after a generation of wage stagnation.
  • Despite that doom and gloom, manufacturing is still responsible for a majority of U.S. innovation, and U.S. manufacturing companies - especially when they empower their workers to self-manage - can have significant productivity advantages over more top-down competitors both domestic and international. They can also pay high wages.
  • Then, very helpfully, Sue shows how the "high-road" policies people like her and Dan Luria have been talking about for a long-time can and should dovetail with the green jobs agenda.

Sue's proposals have many good counterparts, and virtually every candidate and many many union and environmental groups are coming up with their own proposals.

But even an emergent discourse like green jobs can get hampered by inherited discourses, like that promoted by the boosters of our current NAFTA-WTO style trade policy. Former U.S. trade officials are arguing that we mustn't pursue any policies that are WTO-illegal, while even our good friends are feeling pressure to justify their policies in the lens of the WTO.

I don't know about you, but the first institution that pops in my head when I think of saving the planet is not the WORLD TRADE ORGANIZATION. I dunno, maybe it's because its judges have ruled against so many good environmental policies both here and abroad. By bending over backwards to claim WTO legality, I think we sell ourselves or the planet short on the discussion we need to be having about reinvigorating local democracy and economies.

Part of addressing the global warming crisis will involve immediate action to reduce some of the redundant trade that is taking place (where we ship the same heavy items back and forth across oceans), to correct global trade imbalances, and to empower policymakers and workers to take more control over their economic destiny. (This is what I think is what Sue is talking about in her proposals for everything from the shop floor to a national economic strategy.) I think the public is very ready to have this discussion, as can be seen from discussions of trade policy playing so prominently in the campaigns. I don't think we have to wait until 12 years to start addressing competitiveness issues either, as many of the proposals before Congress currently do. After all, much of the offshoring of U.S. production to Mexico and China happened in considerably shorter time periods.

In other words, we need to decide what is to be done, and then figure out how to overhaul the WTO to meet our targets, rather than starting from the unhelpful premise of ensuring WTO legality.

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Communism for capitalists: WTO limits on global warming policy

There is little doubt that government will play THE leading role in stopping further global warming - no other institution in society has the police power or administrative economies of scale to make it happen, regardless of the specific combination of mechanisms to be used. All of the Democratic candidates (see here, here, and here) crib some portion of their climate change / green jobs proposals from the ambitious Apollo Alliance project, which sees a primary role for government, even it its more voluntary aspects. Portions of this agenda are also in a bill co-sponsored by all current senators of both parties running for president.

Well, as this stunningly candid report from the pro-corporate National Foreign Trade Council attests in explicit detail, virtually every component of a response to global warming is WTO-illegal. NFTC recounts the history of environmental policy at the WTO (and GATT), including the past successful challenges to our Clean Air Act and corporate average fuel economy (CAFE) standards. They go on to explore how every global warming bill in Congress - elements of which are reflected in the candidates' plans as well - violates WTO rules.

Among the possible WTO violations: energy efficiency regulations and standards, government-administered eco-labeling (even voluntary labeling, as Andrew Green has argued and which is cited in the NFTC paper), public procurement of climate-friendly goods and services, and possibly even emissions trading or auctioning - long seen as one of the most market-friendly way of addressing global climate change. This is mostly because of the challenge in finding a way to require domestic manufacturers to comply with costly reforms while importers importing from less-regulated countries don't have to comply.

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"WTO-perfect": enemy of the perfect and the good

Given the massive asymmetries of power in the world today, how does progressive reform happen? Consumers and workers want to have a cleaner environment and better jobs, but the corporations calling the shots stand to lose out over the time horizon they consider relevant.

Jack Knight, one of the top political economists out there, argued that the spontaneous emergence of institutional or policy changes will tend to benefit the powerful. In those rare instances where an outcome not unfavorable to the less powerful emerges, it's through a complex bargaining process where the "little guy" can impose sufficient costs on the "big guy" to make his life miserable unless he changes, or alternately where the "big guy" can somehow be paid off in a big way to not fight the change.

Progressives and reformers in general who want to see change in their lifetime are always looking for openings in these regards. It'll take many lifetimes to re-build the union and consumer movement to where it needs to be, but some short-term successes can embolden us to keep our organizing going - even if they are clearly the sloppy outcome of bargaining processes where the deck is stacked against us.

So the writers' strike, for instance, is about imposing costs on the "big guy" to get him to bargain. But environmentalists around the world have found some clever ways to increase the rewards for change. (More on this in coming days.) The problem with our trade policy, unfortunately, is that it precludes many such strategies in the name of facilitating ever-expanded corporate trade. To paraphrase Voltaire: the "WTO-perfect" is both the enemy of the perfect and the good.

Such a partial strategy was targeted in the recent case where the EU successfully bashed Brazil at the WTO over its import ban on retreaded tires. According to Inside U.S. Trade, "Brazil claimed it needed to ban retreaded tires because they become waste tires more quickly than new ones, and that their disposal poses risk to the environment and human health." But at the WTO, you have to prove that such a environmental policy is "necessary," which means, among other things, convincing panelists who specialize in trade and not environmental policy that there is no less-market restricting option even conceivable that could be applied instead.

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Christmastime for corporations (in Germany, err, here)

Just in case you were worried that the corporate masters weren't getting enough of a Christmas this year, what with record CEO pay and booming inequality, never fear. It looks like they may get to gobble up U.S. Postal System, liquiefied natural gas terminals, Mexican peasants, the right to avoid obeying the law overseas, and right to not give back to the community. Let's quickly review:

The Bush administration is on the cusp of formally revealing what they're going to give the European Union to "compensate" for their Internet gambling providers not being able to sell in the U.S. market. As we detail in our release here,

To compensate Europe for the removal of the U.S. gambling sector from WTO jurisdiction, the Bush administration reportedly proposes to bind U.S. storage and warehousing, and postal and delivery to WTO jurisdiction, among other service sectors. Compensation talks have been conducted behind closed doors without input from congressional committees whose jurisdiction would be compromised by the proposal.

What this could mean in practice is that there would be additional pressures to privatize and deregulate not only our postal service, but also our safety policy around dangerous LNG terminals. Oh, yeah, and this is just for the right to maintain a gambling policy that corporations don't like - a policy that treats foreign and domestic gambling firms THE SAME.

Exhibit Two takes us to Mexico, where corporations have reportedly used NAFTA's investor-state system to beat back the Mexican government's right to have a sugar policy for its small peasant producers, rather than allow U.S. high fructose corn syrup exporters and users (the soft drink companies) to run roughshod over a rare policy that keeps Mexicans employed in Mexico. Now, Mexican taxpayers will be ordered by a secretive World Bank court to pay what will probably be tens of millions of dollars to companies like Archer Daniels Midland.

As we wrote about the case back in 2005, Mexico's regulations of HFCS, which it will now be forced to compensate ADM for, were one of the few ways that governments could take active steps to keep farmers on both sides of the border from being squeezed by huge agribusiness corporations. It turns out that's it's inconsistent with NAFTA to help society's most vulnerable.

The final stop is north of the border, in Canada, where U.S. oil companies are using NAFTA to get around having to give back to the community where they are drilling by spending some research and development dollars there. This parallels Big Oil's efforts to  avoid having to pay taxes in Ecuador, where it is using a NAFTA-style tribunal under the U.S.-Ecuador Bilateral Investment treaty to not only not pay, but try to get out of being arrested for not paying. Luke Eric Peterson has the skinny on the Mexico, Canada, and Ecuador cases right here.

And in our ongoing Trade Musical Hits, here's Rage Against the Machine's "Testify," directed by Michael Moore.

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On the political divan

Late November is the time of year when we try to digest the food we've been shoveling in our traps for days, and also try to make some sense of the goings-on of the year. But the Washington Post had a story that is not helping my physical and psychological recovery any. There's a lot of scary stuff in there about how politics happens in this town (together with Rahm's questionable dating advice), but there are some quotes of note within (my emphases):

So this spring the Democrats, in concert with union leaders such as Sweeney, crafted a long list of requirements for any trade deal with the administration. The list included requiring other nations to "adopt, maintain and enforce basic international labor standards in their domestic laws and practices" and to implement and enforce multilateral environmental agreements; ensuring that foreign investors do not enjoy greater investment protections than U.S. citizens; and providing guarantees of access to affordable prescription drugs...

"We were able, thank God, to take yes for an answer," said Democratic Caucus Chairman Rahm Emanuel (Ill.), a member of the Ways and Means Committee.

Sweeney was meeting with foreign labor leaders in Berlin when the deal was struck on May 10, but both Rangel and Pelosi called to inform him of the news. At about midnight Berlin time, Sweeney spoke to the speaker on the phone. "This is a historic agreement," he told her.

But moments later, as Pelosi walked into the Speaker's Dining Room to hold a news conference with Schwab and Treasury Secretary Henry M. Paulson Jr., she found herself facing hostile Democrats. A handful of lawmakers opposed to the trade pact with Peru -- including several Democratic freshmen who had campaigned on the issue -- had squeezed themselves into the tiny room on the Capitol's first floor and stared stony-faced at the speaker.

"We're not against trade. We just want a trade system that works," said Rep. Betty Sutton (D-Ohio), a former labor lawyer who listened skeptically as the bipartisan group outlined its achievement.

Many of Sweeney's fellow union leaders delivered even harsher assessments of the new trade accord. Change to Win, the six-million member federation that now ranks as the AFL-CIO's main rival, issued a news release on May 25 saying that the agreement "does not represent the basis for the type of new U.S. trade policy that this nation desperately needs."

Even some leaders of the AFL-CIO's own affiliates rejected the agreement, saying they do not trust President Bush with the enforcement of its labor provisions...

It is a dilemma that leaves Rep. Xavier Becerra (D-Calif.), a Ways and Means Committee member, wondering whether, in incorporating provisions on environmental and labor standards in the deal, his party has proven that it can deliver benefits to the working men and women who helped return it to power.

"Trade has to be sold as something that's good for us. This deal goes partway towards addressing that. Whether it goes all the way . . .," the congressman said, his voice trailing off.

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350,000 indigenous people in Peru say "No FTA"

This week, the Interethnic Association for the Development of the Peruvian Amazon (AIDESEP) sent a letter to Congress (PDF in both English and Spanish) urging members to oppose the Peru FTA, which currently is scheduled to come up for a floor vote next Wednesday. AIDESEP, "Peru’s largest national organization of Amazonian indigenous communities, representing over 350,000 indigenous persons from 1,350 communities spanning 16 different linguistic groups and six regional organizations located in Peru’s Amazon," says:

"We are convinced that the FTA will give incentives for further and irreversible destruction of virgin rainforest, which will in turn increase global warming and displace our communities from their home territories. This is an absolutely unacceptable outcome for our planet, and particularly for the territory where our communities live, as we collectively work to reduce the threat of global warming.

"...the Peru FTA, if approved, would threaten every aspect of our livelihoods and sustainable development program. We are very preoccupied that the administration of President Alan García is auctioning off Peru’s Amazon at a breakneck speed to foreign firms ranging from Hunt Oil to Occidental Petroleum and beyond. Already by 2004, as the FTA was just being negotiated, only 15 percent of Peru’s Amazon was zoned for oil, gas and mining – today, that figure is near 70 percent. (See enclosed map for more detail.)

"...Provisions contained in the Peru FTA are directly incentivizing this massive takeover that is threatening our livelihoods and leading to irreversible destruction of virgin rainforest." [emphasis in original]

The map that is referred to is this one, which we've posted before as it tells a remarkably disturbing story.

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Action Alert: Save the Peruvian Amazon

Check out Public Citizen's latest action alert on the Peru FTA and the environment. Here's an excerpt:

When Big Oil companies are going full steam on a stealth lobbying mission for more access to the Amazon, it doesn't take a geological engineering degree to realize that whatever they are pushing is probably bad for the environment.

So, it's more than a little disturbing that Democrats in Congress are scheduling a vote on one of Big Oil's top legislative priorities - an expansion of NAFTA to the South American country of Peru that would give them powerful new rights to ravage the endangered Amazon rainforest.

Indigenous leaders from the Peruvian Amazon are in Washington, DC right now urging the U.S. Congress to save their Amazon rainforest home and help stop global warming by defeating the Bush administration's proposed NAFTA expansion.[1] But they need our help!

Please urge your representatives in Congress to save the Amazon from Big Oil's Peru NAFTA scheme - and vote NO on HR 3688, the Peru "free trade" agreement (Peru FTA).

Take action here:

And here's the real kicker: in just the past two years, the percentage of the Peruvian Amazon region zoned for oil and gas exploration has exploded from 13 percent to over 65 percent! This includes national parks and other ostensibly protected areas. The Chapter 11-style foreign investor protections in the Peru FTA would help lock in this outrage, even if a new pro-environment government were elected in Peru. This graphic tells the story in stunning fashion:

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Enclave Economy v. Straw Men

My friend Kevin Gallagher of Boston University has a new book out from MIT Press with Lyuba Zarsky called "The Enclave Economy: Foreign Investment and Sustainable Development in Mexico's Silicon Valley."

Unlike a lot of the Friedman-ite platitudes about eating sushi with a Bengali venture capitalist while talking on a cell phone, Kevin and Lyuba actually bothered to go to Mexico and talk to businesspeople and others to learn about the impact that NAFTA has had on Mexico's peoples and policies. Their major case study is Mexico's IT industry, and how it stacks up against its counterparts in Asia and elsewhere.

The picture they paint is not pretty. Under Mexico's pre-NAFTA import substitution regime, the country was able to produce a wide variety of electronics, and at one point nearly 95% of the value-added content of television production. In the 1970s, the government laid out a comprehensive policy to build a domestic computer industry, including by limiting foreign ownership and requiring that firms source nationally and locally. Deemed "an extraordinary success," the program began to unravel and domestic firms began to disappear. First when NAFTA facilitate the massive move-in of multinational companies with less long-term investment in the region, but instead only a temporary commitment to take advantage of low wages. And second when the multinationals traded out Mexico's less than $3-an-hour wages with China's less-than-$1-an-hour wages when that country acceded to the WTO in 2001 and also decided to let footloose capital set up shop without committing to China either.

Why did this happen? Kevin and Lyuba find plenty of blame to go around, but a major culprit is flawed trade deals like NAFTA, which "constrict the scope for developing countries to undertake targeted industrial policies":

Rules on intellectual property rights, for example, make it difficult to develop comprehensive innovation policies. Investment rules outlaw the ability of developing countries to leverage concessions from foreign firms such as content requirements for local suppliers or support for local training. Investment rules also allow private foreign firms to sue national governments when new and un-anticipated (by the investing firms) social and environmental  cut into profits under the argument that such regulations are "tantamount to expropriation." Moreover, the macroeconomic policies need to support contemporary trade agreements - high interest rates and tight fiscal policies - also make it more difficult for governments to design effective policy and offer credit to domestic firms.

Kevin and Lyuba have a summary piece of their book over at IRC.

Contrast this with some other stuff floating around DC recently.

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