WTO attacks U.S. ground beef labeling

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

Corporate meatpackers are rejoicing, saying (according to Reuters)...  174768709v16_480x480_Front

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

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

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

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

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

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

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

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

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

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

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

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

We'll take you through some of the history of this battle. Worryingly, the WTO found that even purely voluntary labeling convention like the U.S. "do Dolphin-safe-logo2 lphin safe" labels could be deemed mandatory (and thus give rise to a WTO violation) if they impeded non-labeled tuna's "marketing opportunities in the United States." In other words, even private consumer preferences for dolphin-safe tuna can lead to a WTO violation. This could cast a real chill on voluntary labeling practices, which a lot of supporters of free trade are in favor of.

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

As Inside U.S. Trade reported today,

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

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

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

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

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USDA's FTA Report Repeats Errors of Previous Flawed Studies

Earlier this week, the USDA released a report attempting to estimate the effects of the Korea, Colombia, and Panama FTAs upon U.S. agricultural trade. It also examined possible effects of the ASEAN-China and ASEAN-Australia-New Zealand FTAs upon the U.S.

Unfortunately, the USDA estimated the effects through a computable general equilibrium (CGE) model, which has a shoddy track record, to say the least. A 1999 U.S. International Trade Commission (USITC) study on the likely effects of China’s tariff offer for WTO accession used a CGE model to estimate that the U.S. trade deficit with China would increase by only $1 billion dollars due to China’s accession. In reality, the trade deficit with China skyrocketed by $167 billion between 2001 and 2008.

Similar studies on NAFTA were also way off the mark. An economist at the Federal Reserve concluded that a CGE-based study of NAFTA underestimated NAFTA’s impact upon U.S. imports by ten times the actual effect of NAFTA. He concluded his study with a recommendation: “If a modeling approach is not capable of reproducing what has happened, we should discard it.”

Not accounting for currency manipulation is a chief problem of CGE models, as Rob Scott at the Economic Policy Institute has demonstrated. The USDA's report even acknowledges the devastating effect currency devaluation can have upon U.S. agricultural exports:

In 1997, U.S. apple exports to Southeast Asia peaked at 150,000 tons, just as the Asian financial crisis struck. The crisis led to sharp devaluations of Southeast Asian currencies that raised the prices of imported apples and income losses that further discouraged apple buying, triggering a dramatic decrease in U.S. apple exports to the region.

As we discuss in a factsheet, Korea is only one of three countries to have ever been placed on the Treasury Department’s list of currency manipulators, having repeatedly manipulated its currency in the past. The Korea FTA contains no prohibition against currency manipulation, so the Korean government could effectively negate the tariff cuts mandated under the FTA through currency manipulation. Despite the long history of Korea manipulating its currency, the USDA’s estimates do not attempt to account for the very real possibility of another devaluation, even though they could have done so through estimating alternative scenarios.

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Japan tragedy highlights consequences of corporate offshoring

Our hearts go out to those who have lost loved ones as a result of the earthquake and its aftermath in Japan.

As humanity collectively sifts through the lessons that can learned from this disaster (including with respect to the perils of nuclear power), Information Week is reporting on another fallout with global implications:

The massive 8.9 earthquake that has caused widespread devastation in Japan is expected to cause worldwide shortages and severe price swings in some semiconductors manufactured in the island nation, according to some analysts.

The electronics expected to be most affected by the 8.9 quake that struck Friday include semiconductor wafers used in making microprocessors, NAND flash used for storing music, video, and other content in handheld devices, and DRAM, which is the system memory in PCs. More than 40% of the world's NAND and 15% of the world's DRAM are made in Japan, according to market researcher Objective Analysis.

In other words, there are consequences beyond just job loss to corporations' decision to offshore production to a few locations on the planet. To put it a different way, what is rational for the individual corporation can be irrational from the perspective of society as a whole.

Such a problem was predicted nearly six years ago by my colleague Barry Lynn, the author of the book "End of the Line." In a column for the FT summarizing the book, Barry wrote:

Time and again, human beings have learned to build buffers into complex systems. We design compartments into our ships, circuit breakers into our electrical networks and minimum reserve requirements for our banks. Yet since the cold war era, we have done the exact opposite with our industrial system. Rather than conceive market-friendly methods to distribute risk and dampen shocks, we devoted ourselves to eliminating the bulkheads that have traditionally existed between nations and between companies. To evoke a more raw analogy, in our production system, we bulldozed all the levees flat.

As a result, we now live in a world where an isolated political or natural disaster on the far side of the globe can disrupt basic systems on which we all depend. Consider what would happen in the event of war on the Korean peninsula, or an uprising in south India, or an avian flu pandemic in industrial Asia.

In the first case, we would immediately lose half the global production of D-ram chips, 65 per cent of Nand flash chips and much more. At a minimum, the result would be massive disruptions in the electronics industry and in all industries that depend on electronics components. In the second case, numerous global companies, including banks, would lose their ability to process information because they have relocated key back-office operations to that region. The third case, meanwhile, presents chilling proof that the production system has evolved in directions no one expected. As a recent article
in Foreign Affairs noted, one cross-border system that would collapse in the event of a pandemic is the one the US relies on for medical respiratory masks.

In each instance, an everyday disaster far away would set off potentially massive disruptions of the industrial systems on which all nations depend... It is time to admit that our grand experiment with radical laissez faire management of industry has failed.

While the global response to the Japan earthquake in the short-term will rightly focus on saving lives and avoiding further deaths, policymakers should also assess why they have allowed corporations to break down reasonable buffers against excessive offshoring of production. A little more redundancy in supply chains is not only collectively rational, but would also have the benefit of creating jobs at home.

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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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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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Drug Trials Abroad Keep Auditors Away

FDA logo We’ve seen manufacturing jobs, IT jobs, customer service jobs, and engineering jobs offshored.  We can now add prescription drug trials to that list. The New York Times reports:

Medical ethicists have worried for years about the growing share of new drugs whose human trials took place in foreign countries where federal auditors could not make sure patients were protected, but no one knew how big the potential problem was.

But according to a report by Daniel R. Levinson, the inspector general of the Department of Health and Human Services, 80 percent of the drugs approved for sale in 2008 had trials in foreign countries, and 78 percent of all subjects who participated in clinical trials were enrolled at foreign sites....

The report “highlights a very frightening and appalling situation,” said Representative Rosa DeLauro, Democrat of Connecticut. “By pursuing clinical trials in foreign countries with lower standards and where F.D.A. lacks oversight, the industry is seeking the path of least resistance toward lower costs and higher profits to the detriment of public health.”

Sure, testing the drugs in lower-income countries is cheaper, but how sure can we be that the trial subjects are giving informed consent when foreign drug trial laws are often weaker than U.S. laws?  And how easily can the FDA audit a foreign testing site to ensure that the trial followed all correct procedures? Not very easily. In fact, the Inspector General’s report found that the FDA was 16 times less likely to audit foreign sites than they were to audit a domestic site, partially due to the high cost of auditing foreign sites.  It’s crucial that the FDA be able to verify that proper clinical procedures are followed. Otherwise, drugs that are unsafe or ineffective could be put on the U.S. market, endangering people’s lives.

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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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Hopping Mad

We wrote last year of the foreign multinational takeover of Budweiser, that staple of American working class life, and how trade pacts have limited efforts to encourage the local beer movement.

Now, the fallout from beer nationalism is rearing its head in the ongoing Gates Gate scandal, where the president has invited Henry Louis Gates and Sgt. Crowley to "have a beer at the White House" and settle their differences. Reports the WSJ:

Late Wednesday, White House spokesman Robert Gibbs hinted the presidential cooler will likely be stocked with what he understood to be the two guests' own personal favorites -- Red Stripe and Blue Moon.

"The president will drink Bud Light," Mr. Gibbs added.

The problem is that all three beers are products of foreign companies. Red Stripe is brewed by London-based Diageo PLC. Blue Moon is sold by a joint venture in which London-based SABMiller has a majority stake.

And Bud Light? It is made by Anheuser-Busch -- which is now known as Anseuser-Busch InBev NV after getting bought last year by a giant Belgian-Brazilian company.

Among rival brewers, the news fell flat. "We would hope they would pick a family-owned, American beer to lubricate the conversation," said Bill Manley, a spokesman for the Sierra Nevada Brewing Co., a California-based brewer that happens to be family-owned.

Jim Koch, founder of Boston Beer Co., which brews Samuel Adams, decried "the foreign domination of something so basic and important to our culture as beer."

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The WTO Wants You to Light up a Cancer Stick

Over at IELP, Simon Lester alerts us to a potential WTO case that Indonesia might bring against the recent U.S. bill to step up regulation on tobacco. Read the full post for details, but I thought Simon's closing comment was interesting:

I hate to sound defensive here, but I just want to emphasize to trade skeptics out there that this issue does not mean that countries can't regulate tobacco. It just means that they can't insert protectionist components into their tobacco regulation measures. 99.9% of these measures are fine under trade rules.  The main problem area is the part about (possibly) treating foreign products less favorably than domestic ones.

An insider in the tobacco debates tells Eyes on Trade:

In terms of what actually happened:

Everyone recognizes that flavorings are a way to appeal to kids.

Menthol historically in the US has been marketed to African Americans, so there is actually extra good public health reason to ban it.

The failure to ban was not because of so-called protectionist impulse, but political reality: It's too big a market to wipe out and get the bill passed. This is probably a combination of both manufacturer power and worries about protests from African-American smokers.

Of course, that political reality is no WTO defense at all.

An important point not mentioned in this post is that Philip Morris International now owns the third biggest kretek maker. PMI -- now a separate company from Philip Morris/Altria -- has alleged no interest in the US market but they are under no contractual limits, so far as I know. PMI's HQ is in Switzerland, but they remain registered as a NYSE company.

Tobacco and public health groups will be very worked up about this, should a [WTO] challenge emerge.

This observer's comment that "political reality is no WTO defense at all" is what's key here. God willing, over the next few years, we're going to see a lot of consumer and environmental protection laws going into effect. A lot of them will be messy, and a lot of them will be criticized by groups like Public Citizen. But I don't think there's an advocate here among us that doesn't realize that the political process is going to yield imperfect results that are still better than nothing. Maybe it's time for a "political reality" carveout from WTO obligations.

An update from Simon on a speech from Rep. Virginia Foxx (R-N.C.) had the member arguing that the U.S. should cowtow to WTO threats. Will this be the next case of the WTO chilling effect? Stay tuned.

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Food safety nightmare

Last week, I participated in the White House civil society listening session on the new Food Safety Working Group. I made the point that we need to hold imports to the same standards and regulations we hold domestic products and producers, that the agencies need the funding and authority to do so, and that our trade agreements need to be renegotiated to favor non-discriminatory, food-safety regulations. Aspects of these principles are in language supported by Reps. John Dingell (D-Mich.) and Rosa DeLauro (D-Conn.), as well as in the Brown-Michaud TRADE Act.

In addition to other public and NGO consumer advocates, there was a heavy industry presence at this listening session. After reading this article in the New York Times, I seriously questioned whether we can expect any positive food-safety reforms to come from these people:

Increasingly, the corporations that supply Americans with processed foods are unable to guarantee the safety of their ingredients. In this case, ConAgra could not pinpoint which of the more than 25 ingredients in its pies was carrying salmonella. Other companies do not even know who is supplying their ingredients, let alone if those suppliers are screening the items for microbes and other potential dangers, interviews and documents show...

government efforts to impose tougher trace-back requirements for ingredients have met with resistance from food industry groups including the Grocery Manufacturers Association, which complained to the Food and Drug Administration: “This information is not reasonably needed and it is often not practical or possible to provide it.”

What? These companies are going on the record to admit that they have no idea where they get their ingredients from? Companies inability to even comply with transparency initiatives should be a national embarrassment. These companies should at a minimum have their corporate charters revoked for negligence. They certainly should not be helping to shape our food and trade policies.

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Offshoring Rubbers, Destroying Lives

I have long threatened to start a new Public Citizen division dedicated to the safety of adult products, because, well, no one is bothering to regulate them, as last year's melamine edible underwear scare showed.

Now, this is happening:

In a move expected to cost 300 American jobs, the government is switching to cheaper off-shore condoms, including some made in China...

“Of course, we considered how many U.S. jobs would be affected by this move,” said a USAID official who spoke on the condition that he would not be named. But he said the reasons for the change included lower prices (2 cents versus more than 5 cents for U.S.-made condoms) and the fact that Congress dropped “buy American language” in a recent appropriations bill...

Fannie Thomas, who has been making AIDS-preventing condoms in southeastern Alabama for nearly 40 years in the small town of Eufaula[, says].

“We pay taxes down here, too, and with all this stimulus money going to save jobs, it seems to me like they (the U.S. government) should share this contract so they can save jobs here in America,” Thomas said.

Thomas and others at the Alatech plant said there aren’t many alternatives for them if it closes down, which is a likely result of the contracting switch.

In fact, the government is close to accepting condoms from two offshore companies: Unidus Corp., which makes condoms in South Korea, and Qingdao Double Butterfly Group, which makes them in China.

There's a number of issues here: first, Buy America, last I checked is still intact. But as we pointed out during the debate on the stimulus bill, this can be waived for a lot of reasons, including NAFTA-WTO-style trade agreements. And I believe that the Chinese bid would have to be only 6% cheaper to choose that over the American bid.

Second, given the rampant problems with product safety in China, there are some serious issues about quality control. As the Kansas City Star reports:

Bill Howe, president of PolyTech Synergies in Ohio, a consultant to the condom industry, said China is “learning” to produce better condoms, but their products are still “notoriously suspect.”

Howe, who has consulted for Alatech, acknowledges that the company got a “sweet deal” for years as the only supplier to the U.S. government for international condom distribution. Nonetheless, “they have a high level of integrity, and you don’t get that in China,” he said.

Even Chinese condom makers admit that some of their customers did not care for their products. Chinese buyers have complained their country’s condoms were “too thick, low quality and don’t feel comfortable.”

Problems persisted for some Chinese condom makers as late as 2007. Free Chinese-made condoms passed out by AIDS groups in Washington, D.C., were the subject of numerous complaints about unreadable expiration dates. Sometimes, just opening the packages damaged the condoms, some groups alleged.

Of course, NAFTA-style trade agreements and the WTO put sharp limits on the kinds of product standards and inspections we can apply to imports, while the WTO procurement agreement places limitations on the kinds of product standards or environmental or human-rights qualifications we can put on suppliers to the U.S .government. Read more here, on our section on product safety.

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Attack on product safety law averted

More news from other divisions of Public Citizen working to make the products we buy safer. Here is a press release from our colleagues at Congress Watch:

South Carolina Sen. Jim DeMint’s attempt to undermine the Consumer Product Safety Improvement Act by amending the economic stimulus package fortunately never came to fruition. Lawmakers should block any more attempts to change the product safety law.

DeMint’s proposal, never voted on, would have unnecessarily exempted some businesses from the new safety regulations and would have allowed retailers to keep selling products that contain dangerous levels of lead. Empirical evidence links lead to permanent brain damage in children.

Rolling back protections, as Sen. DeMint proposed, would have meant disregarding the plights of the many children who have been hurt, become sick or even died from unsafe products - and would have put more children at risk by allowing millions of dangerous products to be placed on the market. The flood of hazardous toys and children’s products onto our shelves is what prompted overwhelming bipartisan majorities in Congress to pass the product safety act in August.

Sen. DeMint’s amendment was prompted by an outcry from small manufacturers and secondhand sellers who fear the new law will force them out of business. But changing the law - and putting children at risk - is not necessary to address the concerns that small businesses have raised. The Consumer Product Safety Commission can resolve these concerns with some simple, commonsense rules. It already has begun to do so.

However, at present the commission sorely lacks the leadership it needs to implement this law effectively for consumers or small businesses. Its current chair, Nancy Nord, is a holdover from the past administration, which was often too eager to protect manufacturers at the expense of public health and safety. It’s time for Nord to go, and that - rather than modifying the Consumer Product Safety Improvement Act - is where public officials should focus their energy. The country deserves a product safety leader who is committed to carrying out Congress’ mandate and protecting the public.

Again, for Global Trade Watch's role in this ongoing campaign, check out our report Closing Santa's Sweatshop (PDF) for things we need to do to proactively ensure product safety.

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One step towards "No More Toxic Toys"

Congrats to our colleagues in Public Citizen's Health Research and Litigation groups, who in conjunction with the Natural Resources Defense Council won a victory today in requiring toys made with toxic phthalates come off the shelves by February 10. By the way, this was simply the law as Congress passed it last year; but Bush and his pro-corporate Consumer Product Safety Commission decided they were going to try to break the law. Us good guys made sure they didn't. Read more at Public Citizen's Citizen Vox blog.

Of course, here at Global Trade Watch we also work on this issue, since global "trade" rules encourage offshoring of toy production to countries with lower safety standards while at the same time making it more difficult to enforce our own standards at the border. Check out our recent report, Closing Santa's Sweatshop (PDF), for more on the next steps we need to take on toy safety.

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Roquefort trade war, Stimulus Buy America Brouhaha Shows WTO Model Broken

By Lori Wallach and Todd Tucker*

Two developments this week provided further illustration that the current NAFTA-WTO model of trade and globalization is fundamentally flawed.

Exhibit A: One of the most contentious issues surrounding the congressional debate on the massive stimulus bill designed to jump start the sinking U.S. economy was… a provision on “Buy America” rules for iron and steel in public works projects?! Opponents of the measure – which include some of the nation’s leading offshorers of U.S. jobs, such as GE and Caterpillar – decried the plan to invest our tax dollars in the U.S.economy as a declaration of war against “free trade,” and claimed that the measure was WTO-illegal. (As it turns out, on the WTO-legal business, the corporates are lying, as we show here in a detailed memo.)

Exhibit B: The Bush administration, in its final week in office, imposed tariffs of up to 300 percent on French Roquefort cheese, and extended punitive tariffs on truffles, Irish oatmeal, Italian sparkling water and foie gras. The reason? In the 1990s, the Europe Union (EU) had banned the use of artificial hormones for raising beef in response to health concerns. The Clinton administration, at the urging of giant agribusiness companies, challenged this measure at the WTO because it not only banned the chemicals’ use by European farmers, but banned imports of artificial-hormone-raised beef. A WTO tribunal ordered the EU to allow in the U.S. beef, and when EU officials, under threat of a massive consumer revolt, refused, the WTO authorized the U.S. to impose retaliatory sanctions. (Canada also sought and received similar authorization.)

When a country’s state, local or national policy is ruled against at the WTO, federal authorities are required to take all available steps to force a change in the law – otherwise, they risk facing perpetual trade sanctions. It’s a fairly powerful system: in the nearly 15-year history of the WTO, countries have always watered down or eliminated the challenged laws, including in the cases brought against U.S. laws (which we’ve lost nearly 90 percent of, by the way). There’s only been one exception, and that’s the beef-hormone case. The Europeans – in an admirable display of moxie – decided that ensuring consumer safety was their top priority. Although they’ve been paying out their pound of flesh for a decade – at a rate of over $120 million per year since 1999 – the Europeans apparently weren’t suffering enough, and Bush upped the cross-sanctions on his way out the door.


The larger question raised by these two conflagrations is why political leaders signed up food-safety and government procurement rules – both quintessential, non-trade domestic issues – to comply with so-called “trade” agreements in the first place. A big part of the answer is that they were pushed by companies like GE and Caterpillar and large agribusiness multinationals, who enjoy wild privileges under these pacts that encourage the offshoring of U.S. jobs. Since then, corporations have used the overreaching “trade” agreement rules to attack an array of important non-trade, public-interest policies. The latest installment is the current scare campaign to water down Congress’ response to the economic crisis, and gin up the attack on important food-safety measures abroad.

Nations – not just the U.S., but all nations – should have a right to invest in themselves, spend their tax dollars in the manner deemed best by their democratically elected officials, and pursue other public-interest policies. President Obama and the last two classes of freshmen members of Congress came to office on pledges to overhaul the failed globalization policies of the past, and pursue global integration and cooperation on fairer terms. Let’s hope that they stand their ground: our future prosperity and security depends on it.

*The writers are director and research director, respectively, of Public Citizen’s Global Trade Watch division. They blog at EyesOnTrade.Org. This was originally posted on Huffington Post.

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One pill makes you larger, and one pill makes you small

There is a worrying new front of concern for fair traders: the almost complete offshoring of our nation's medicine supply. Here's the latest from the NYT:

Experts and lawmakers are growing more and more concerned that the nation is far too reliant on medicine from abroad, and they are calling for a law that would require that certain drugs be made or stockpiled in the United States.

“The lack of regulation around outsourcing is a blind spot that leaves room for supply disruptions, counterfeit medicines, even bioterrorism,” said Senator Sherrod Brown, Democrat of Ohio, who has held hearings on the issue.

Decades ago, most pills consumed in the United States were made here. But like other manufacturing operations, drug plants have been moving to Asia because labor, construction, regulatory and environmental costs are lower there.

The critical ingredients for most antibiotics are now made almost exclusively in China and India. The same is true for dozens of other crucial medicines, including the popular allergy medicine prednisone; metformin, for diabetes; and amlodipine, for high blood pressure.

Of the 1,154 pharmaceutical plants mentioned in generic drug applications to the Food and Drug Administration in 2007, only 13 percent were in the United States. Forty-three percent were in China, and 39 percent were in India.
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Petition to Obama: Close Santa's Sweatshop

Toys You may have read a few days ago that we recently released a new report, Closing Santa's Sweatshop (PDF), showing how trade agreements exacerbate our import safety crisis and what changes need to be made to fix the problem.

We are now circulating a petition to President-Elect Obama, calling on him to keep his campaign pledges to address unsafe imports and to fix the NAFTA/WTO-style agreements that encourage the offshoring of production while simultaneously limiting border inspection and imported product safety standards.

Sign the petition!

(Photo by Flickr user "cursedthing")

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Becerra: Trade Not an Obama Priority

Rep. Xavier Becerra (D-Calif) has reportedly turned down the Obama USTR job. According to Politico:

The California Democrat – the first high-profile figure to reject an Obama job offer – says he turned down the U.S. trade representative gig because he was concerned that trade would not be a big priority in the new administration...

Becerra told the Spanish-language newspaper La Opinion he had concluded that trade “would not be priority number one, perhaps not even two or three,” according to a loose translation of his remarks, adding that, “To do this job well, it would be necessary to travel a lot ... and also I have a family.”

As we document in a new report "Closing Santa's Sweatshop", the USTR - along with agencies like the Consumer Product Safety Commission, responsible for safety of imported toys - has a lot to tackle in the coming years. This includes renegotiating existing trade deals like NAFTA and the WTO to create policy space for product safety and climate reform.

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New Report: Closing Santa's Sweatshop

We just put out a new report, "Closing Santa's Sweatshop: How to Deliver on Obama's and Congress' Toy Safety and Fair Trade Promises".

We find that, while production of our children's toys has become globalized, our consumer safety system and its protections against injury and death have not. And unfortunately, our trade agreements take us in the wrong direction.

6a00d83451e0d569e200e5523e3aa888338 The United States is expected to import $23 billion in toys in 2008, 90 percent of that from China. Imports this year represent 90 percent of U.S. toys, which is the highest toy import level and share on record. Many nations producing our children's toys have extremely lax safety standards and enforcement. Yet, while toy imports exploded by 562 percent from 1980 to 2008, the budget of the agency responsible for toy safety, the Consumer Product Safety Commission (CPSC), was cut by 23 percent, with staffing cut nearly 60 percent during the same period.

Unfortunately, the threat of toy safety improvements being attacked as "illegal trade barriers" under current U.S. trade agreements is no longer only hypothetical. The report describes actions taken by China in 2008 invoking two U.S. safety initiatives relating to state-level bans on lead and bisphenol A (BPA) in toys that China claims violate World Trade Organization (WTO) rules. U.S. laws challenged at the WTO have been ruled against more than 80 percent of the time.

The report lays out a variety of recommendations on how to reform our trade agreements and domestic policy to guarantee toy import safety. "Closing Santa's Sweatshop" also documents campaign pledges on import safety made by President-elect Obama and Rep.-elect Jared Polis (D-Colo.) and other new members of Congress – 71 of whom replaced congressional supporters of the failed trade-policy status quo generating the import safety crisis in the 2006 and 2008 elections.

You can find the press release and all the hot materials here.

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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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United States and China teaming up to push toxic toys?

As state (and some federal) legislators across the United States have been working feverishly to keep toxic toys away from children, the U.S. government is working to derail other countries' efforts to do the same.

Which country do you think the U.S. government is partnering with to attack toy-safety standards? It couldn't possibly be China (the source of a flood of unsafe imports in recent years to the U.S.), could it?

According to Inside U.S. Trade:

The U.S. and China this week both pressed Brazil at the World Trade Organization on import licensing procedures for toys put in place last year in order to help ensure the safety of imported toys, and claimed that the procedures have caused unnecessary delays for exporters trying to ship toys to the Brazilian market.

The two countries raised the issue in an Oct. 19 meeting of the WTO Committee on Import Licensing. While the manufacturing and shipment of toys largely occurs in developing countries such as China, Malaysia and Thailand, toy companies such as Mattel that are headquartered in the U.S. and design products here are also interested in the issue, sources said.

For the third level of irony/disgust in this situation, please see our recent post about Delegate Jim Hubbard from Maryland who received troubling correspondence from the Chinese government regarding legislation he introduced to remove toxic toys from Maryland shelves.

It's really nice that in the face of a product-safety crisis here at home, the U.S. is using scarce government resources to attack other countries' regulations, at the behest of Mattel and with China no less.

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Treating Food Like Color TVs

Even former President Bill Clinton is voicing concerns that the current international trade model poses significant risks for economic and food security in the developing world.

The Associated Press reports:

Former President Clinton told a U.N. gathering Thursday that the global food crisis shows "we all blew it, including me," by treating food crops "like color TVs" instead of as a vital commodity for the world's poor.

Clinton criticized decades of policymaking by the World Bank, the International Monetary Fund and others, encouraged by the U.S., that pressured Africans in particular into dropping government subsidies for fertilizer, improved seed and other farm inputs as a requirement to get aid. Africa's food self-sufficiency declined and food imports rose.

Now skyrocketing prices in the international grain trade — on average more than doubling between 2006 and early 2008 — have pushed many in poor countries deeper into poverty.

Indeed, many countries have become net food importers over the neoliberal period, and are already being slammed by an increase in food prices brought on by the ethanol boom and weather disruptions. According to World Bank data, in 2005, after a decade of the WTO, 103 countries were net food importers, a figure that was at least 19 more than in 1991, prior to the conclusion of the Uruguay Round. These World Bank estimates include unstable nations like China, the Philippines, Pakistan and Nigeria - all of whom were previously food self-sufficient. At least 14 additional countries - like Haiti and Mozambique - were self sufficient in 1981, before structural-adjustment policies were adopted.  Additionally, some poor countries like Sierra Leone and Haiti are spending well over half of their export revenues just to finance food imports.

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Melamine Scare Goes Adult

2823877464_ecb76e0205_3 It's official. It's not just kids who are endangered by the China melamine scare, adults are now at risk too, in their most, uhm, adult activities.

According to Marie Claire magazine, Britain's novelty shop Ann Summers has had to pull some of its most popular edible sex toys off the shelf because they contain many times the allowable amount of melamine. The guilty culprit? A Chinese manufacturer named, wait for it, Le Bang. I think that is about as much juice as I can offer on a family-oriented blog like our own, so you'll have to go the original source if you want more details.

As we wrote last holiday season, one of the main reasons that corporations have offshored so much production to China in the WTO era is to avoid U.S.-style product liability laws. The NYT reports on how
this lack of product safety is affecting consumers within China:

The first sign of trouble was powder in the baby’s urine. Then there was blood. By the time the parents took their son to the hospital, he had no urine at all.

Kidney stones were the problem, doctors told the parents. The baby died on May 1 in the hospital, just two weeks after the first symptoms appeared. His name was Yi Kaixuan. He was 6 months old.

The parents filed a lawsuit on Monday in the arid northwest province of Gansu, where the family lives, asking for compensation from Sanlu Group, the maker of the powdered baby formula that Kaixuan had been drinking. It seemed like a clear-cut liability case; since last month, Sanlu has been at the center of China’s biggest contaminated food crisis in years. But as in two other courts dealing with related lawsuits, judges have so far declined to hear the case...

Chinese officials, under pressure to promote fast rates of economic growth and to enforce social stability, routinely favor producers over consumers. Product liability lawsuits remain difficult to file and harder still to win, especially if the company involved is state-owned or has close connections to the government...

“This is a product liability case that in a Western country would turn into a class-action lawsuit,” Professor Zhang said. In China, he said, “they don’t want to see so many people getting involved in one lawsuit. This might threaten social stability.”

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Offshoring of Child Care Reaches New Heights

The Onion gives satirical coverage to the offshoring of health care debate. (HT to Ben Muse.)

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NAFTA Health Care Suits and Melamine Milk

Embassy, Canada’s Foreign Policy Newsweekly, reports that Melvin J. Howard, an Arizona businessman, frustrated after failed attempts to open private surgical centers in Canadian provinces, is asserting the rights NAFTA gives private investors: He is suing the Canadian government for over $150 million in lost expenses and profits!

Or at least he’s trying to - he's filed the first round of paperwork.

Canadian consumer advocates, legislators, and health care professionals will be up in arms! Rightfully so. Canadians have been assured time and time again that their federal trade negotiators have safeguarded their health care system and not ceded control to private investors.

Sound familiar?

This case would expose all sorts of vulnerabilities for health care services, many of which were discussed in a report issued by Public Citizen a few months ago.

What does this mean for us?

First off, the United States is just as vulnerable as Canada to these kinds of NAFTA investor suits. That is bad news since foreign investors have succeeded five times with NAFTA Chapter 11 claims, and $35 million in public funds have been paid in compensation to foreign investors by governments.

Furthermore, this example brings attention to the kinds of challenges legislators might face as they try to bring desperately needed reform to our health care system. Options on the table, like the single-payer systems proposed in 16 states and pharmaceutical purchasing plans, are among the many reform measures vulnerable to investor challenges.

Luke Eric Peterson, investor-state guru, thanks his lucky stars Canada already had a single-payer system in place before NAFTA:

A few years ago, lawyers working for the Romanow Commission warned that if Canada had been bound by NAFTA-type obligations in the 1960s, we might never have seen our single-payer government health insurance scheme brought into being. Quite simply, the price of paying off all of the private insurance operators might have been too high and the government would not have introduced a single-payer system.

That analysis doesn’t bode well for our own reform efforts in the United States. Peterson also discusses possible NAFTA hurdles a future pharmacare plan might face:

Concerns have long been raised that the NAFTA’s “expropriation” provisions might prevent governments from bringing private sectors of the economy into the public fold.  For example, Liberal proposals for a national Pharmacare plan raised questions as to whether such a public scheme might encroach upon—or, in NAFTA terms, expropriate—the turf of private insurers. If that were the case, Ottawa might need to compensate any U.S. investors who lost their business-line at the hands of the government.

Peterson points out that at the very least, if Howard brings his case to a NAFTA tribunal, we’ll get a chance to see some of NAFTA’s ambiguous language clarified.

On an even more disturbing health-care note, let’s shift to China.  At the end of last year, we discussed the recall of dangerous toys and dog food imported from China. Unfortunately, regulators this time around failed to protect Chinese consumers from baby formula which contained melamine, a chemical additive found in plastics and fertilizers (the same additive found in the dog food that was making pets sick last year).

The NY Times reports that 3 babies have died from the contaminated baby formula, with at least 6,244 babies sickened. 

The reason behind melamine in baby formula?  A mad dash for increased profits.

Continue reading "NAFTA Health Care Suits and Melamine Milk" »

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Consumers/States Against Trade Premption Insurance Bill

A host of consumer and subfederal officials - including yours truly - are questioning a provision in H.R. 5840, an insurance bill on the House floor today. You can find their letters on the topic here, but today's Congress Daily has the main scoop:

Public Citizen, the Center For Economic Justice, and the U.S. Public Interest Research Group sent a letter Monday to lawmakers asking that they vote against the legislation by Financial Services Capital Markets Subcommittee Chairman Paul Kanjorski, D-Pa. The bill would allow the proposed office to establish federal policy on international insurance matters, ensuring that state laws are consistent with international trade agreements.

The groups argue the bill would give the office too much latitude to interpret international agreements on matters that are under congressional purview. They fear that such authority would allow the office to pre-empt state consumer protection laws.

"There is no way to predict -- and thus provide safeguards for -- all of the U.S. consumer protection measures that might annoy foreign insurance firms in the future. Thus, the very concept of empowering any federal agency to enforce such international commercial agreement obligations for foreign governments and firms against U.S. states is fatally flawed," the groups wrote.

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Kwa: "Doha Collapse Won't Mean Suffering for The Poor"

Comrade Aileen Kwa of the Third World Network has some great analysis over at IPS:

Will the poor suffer because of the way the Doha talks ended? The failure of the talks can in fact be regarded as a victory because key developing countries were able to stand by their principles and to defend the interests of the poor in their countries...

The world is in a very different place than when the World Trade Organisation (WTO) was formed in 1995. At that point the Washington Consensus advocating liberalisation and deregulation was still at an all-time high. It has fallen from its pedestal since.

Its failure can be seen in the fact that many African countries, despite implementing neoliberal structural adjustment policies to the letter, have de-industrialised in the last 20 years. The failure of the Doha talks is another blow to the crumbling consensus...

Binding a country’s trade policy and liberalising in accordance with a standard formula cannot accommodate this dynamism. In fact, liberalisation cannot be an end in itself. Countries should liberalise only when it is of benefit to them...

Countries should be allowed to explore a diversity of trade policies, in as far as they are not harmful to others outside.

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Dit Bud is Voor U / Este Bud é pra você

I've loved hearing the stories in recent days about all the righteous working class anger at Budweiser being bought out by the Belgian-Brazilian InBev company. Of course, many of the buy-outs and attempted buy-outs of the last few years stem from the overvalued dollar / trade deficit. If we're giving the world more cash as we consume their products, they've got to turn around and do something with the Benjamins. As it turns out, the acquisition of U.S. companies is one way to do it.

As a lover myself of smaller breweries of the kind profiled in Imbibe Magazine, I don't always have a lot of sympathy for the trials and travails of large corporate beer producers. But unlike Coors, both Bud and Miller are unionized, so hopefully the Bud sell-off will not result in any change in that. The Teamsters are sure to hold ImBev's fat to the fire on that one.

This_buds_for_you As with many other commodities and services, government efforts to keep beer production local, organic and/or union are seriously hindered by WTO (previously GATT) and NAFTA rules. Here's an NYT article from 1992:

The Canadians say the tax credits that many states offer companies, based on annual production of beer in the state, discriminate against them. The Anheuser-Busch Companies, controlling nearly half the beer market in the United States, for example, gets $21 million of annual tax savings from a brewery in Columbus, Ohio, the Canadians complained to GATT.

Canadian beer executives say a GATT panel has now ruled in favor of the Canadians. The ruling has not been made public, and officials of GATT and of the United States and Canada have declined to comment. If the reports are true, it would be the first time that American state laws were found in violation of international trade laws.

How could this happen? Here's Ruth Walick:

Because of its success in reducing world tariffs and preventing tariff wars, the GATT in the 1970s turned to nontariff barriers (NTBs). NTBs comprise an array of national laws, procedures, regulations, permits, standards and other government requirements. In the American federal system, many NTBs also result from the exercise of powers by state and local governments.

Since state and local governments are bound by the national Supremacy and Foreign Commerce Clauses of the Constitution, rulings by GATT dispute settlement bodies carry the potential for preemption of state and local government laws and regulations. For example, in a 1991 dispute settlement, a GATT panel upheld a Canadian complaint against a constitutionally sound Minnesota tax favoring small breweries (the so-called "Beer II" case), which effectively nullified the Minnesota tax. 

As we rage on in Queens pubs about the Bud takeover, let's also look through our beer goggles at the root causes.

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Outsourcing financial security

The New York Times is reporting a Bush administration push to "harmonize" accounting standards, something that we've been warning about for a long time.

James D. Cox, a securities law expert at Duke Law School who returned this week from teaching corporate law in Europe, said the shift to international rules amounted to “outsourcing safety standards.”

“We would not for a moment tolerate having American auto safety standards set by China or India,” he said. “Why should we do it for financial safety standards? There has to be some accountability.”...

Senator Carl Levin, Democrat of Michigan, said the proposals would “weaken the pressure for credible oversight” of the markets and their regulators.

“This is a very, very serious problem,” Mr. Levin said. “We’ve had so many losses to investors based on inadequate oversight. We can’t proceed to give control of regulation — to delegate or cede control — to bodies that are not accountable. If this is delegated to regulators overseas, it weakens our ability to put pressure on the regulators to do what the law requires them to do.”

What's interesting about these quotes is how much we in fact do outsource our food and product safety to less-well-regulated jurisdictions. Some have in fact been quite open about this as an intentional strategy to save money.

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Maryland v. The People's Republic of China

It began as an effort to protect the children of Maryland from unsafe toys. Now, thanks to a disgruntled Chinese government and WTO, Del. James Hubbard’s (D-Prince George's County) proposed legislation in the Maryland General Assembly on potentially harmful chemicals has entered the ranks of “barriers” to international trade.


As you may remember, last year saw a slew of recalled Chinese toys, which were found to contain dangerously high levels of lead. Hubbard, dissatisfied with the Bush administration’s response, proposed a bill that would allow Maryland to monitor its own toys. The bill, which will clear Maryland store shelves of dangerous toys, did more than raise international eyebrows. From a recent article in the Washington Post, here’s how it went down:

The Office of the U.S. Trade Representative alerted the Chinese government, which sent a letter from Beijing to protest the bill as a barrier to trade. Lawmakers in Annapolis were unfazed and passed the bill, which takes effect next month.

Then came a four-page missive from the World Trade Organization's Committee on Technical Barriers to Trade -- in English and Chinese -- opposing another of Hubbard's bills, to ban a chemical compound called bisphenol A that is central to the plastics industry. Manufacturers in the United States and China use the compound in baby bottles and other products. With testimony on both sides, the bill did not pass out of a House committee.

The Chinese said there is "no specific scientific evidence" proving that products containing bisphenol A are hazardous to children.

Hubbard said he believes both complaints were prompted by lobbyists for the chemical industry, here in Washington.

"I truly feel the [chemical] industry and the toy industry are running to China and saying, 'You ought to oppose these bills, and if you don't you'll lose out on product sales in America,'" he said.

The WTO’s signature 'trade until proven deadly' threat justification was successful, and the bill didn’t make it out of a House committee. In an interview on the Kojo Nnamdi Show on Monday, Hubbard expressed his consternation: "This was a public health issue, not a trade issue."

In the past, international trade rules have stretched an intervening hand into state legislatures on a number of important issues, including health-related environmental regulations. Yet the WTO, not to mention Chinese government's attempts to preemptively intervene in a state's legislative process is taking their vested interest to another level.

Concerned that similar legislation would receive such undesired attention in Maine, the state's Citizen Trade Policy Commission issued a letter to the USTR which received this response. Hardly reassuring, their explanation is that the WTO notification system which "normally calls for us to notify proposed agency regulations" had "inadvertly included certain state legislative proposals." They assure it will not happen again in the future.

As states increasingly feel the yoke of international trade agreements in which they have had virtually no say, legislators from around the country are seeking new ways to work together to improve the process of state-federal consultation when it comes to trade policy-making.

Special thanks to Isaac Raisner for his contribution to this post.

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Internationalist? Only if Detroit and Big Cattle Say So

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

With polls and protests casting the a shadow over the U.S. image in the world, how do you win hearts and minds in other countries? Is it by forcing them to dismantle consumer protections? Is it be forcing them to dismantle an industrial system which offered its workers much greater security than our downsized and offshored auto workers? Americans don't want what is left of the Progressive and New Deal and 1970s eras dismantled, and it appears that other countries don't either.

Emphasizing shared class and consumer interests would be a great way to unite the interests of Koreans and Americans, and overcome some of the animosity that Koreans feel towards the U.S. government. The Obama campaign is not helping its internationalist street cred by making the sole focus of its criticism of the Korea FTA that Korea has standards that are too high. Instead, they should be supporting higher U.S. food and product standards so that our producers can gain global credibility without having to resort to deregulatory shenanigans. In fact, take it a step further and commit to working with the Koreans at the WTO to ensure that country's retain full policy space to enact food and product standards without risking trade sanctions.

Don't get me wrong: I understand the domestic political advantage you can gain by beating up on other countries and making it seem like you're sticking up for the national interest. But you can also gain a similar advantage by critiquing corporations in the name of consumer and worker interests. And using big stick trade "diplomacy" for the benefit of special interests does not do many favors to our long term diplomatic interests.

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This is what (beef) democracy looks like

It's no secret that America's food and beef safety system is highly problematic and inferior to that of many Asian and European nations. So it shouldn't be any surprise that our agribusiness companies - already responsible for the destruction of the Mexican peasantry via NAFTA - have their sights set on another "barrier to trade": strong consumer regulations.

In fact, that's precisely the target of the latest NAFTA-style trade deal with Korea, and the government there very nearly caved to U.S. pressure to allow U.S. beef into the country's famously high quality domestic beef market. The Korean people put the smackdown on that proposal, as the NYT reports (with their beautiful photo as well):

President Lee Myung-bak pledged a "new beginning" on Wednesday as he contemplated reorganizing his unpopular government, which has been shaken by the biggest anti-government demonstrations in two decades.

The demonstrations against Mr. Lee started six weeks ago when students began protesting11koreainline1190 his government’s decision in April to resume imports of American beef despite widespread fears of mad cow disease. They grew into a broader backlash against Mr. Lee’s leadership style and his policies on everything from North Korea to education reform programs.

Speaking to a group of businessmen at his office, Mr. Lee gave his first comment on the massive rally against his four-month-old government that brought at least 100,000 people into the streets of Seoul on Tuesday and prompted his entire cabinet to offer to resign.

The beef protests have dealt a sharp blow to Mr. Lee, who was elected in December championing a new “pragmatic” approach to ties with Washington...

The protests Tuesday took place on the 21st anniversary of the huge pro-democracy demonstrations that helped end authoritarian rule. Overhead, balloons carried banners that said "Judgment day for Lee Myung-bak" and "Renegotiate the beef deal." One widely distributed leaflet said, "Mad cow drives our people mad!"

The agriculture minister, Chung Won-chun, visited the protest site to offer an apology in a speech, but protesters quickly surrounded him, chanting "Traitor!" and he was forced to leave.

Can you imagine this kind of outpouring in the U.S., and over food policy of all things! We don't get that kind of crowd for an anti-war march! Would we get that kinda crowd for health care?!

The insidious thing about NAFTA-style deals is that, not only do they open the borders to (in this case) unwanted products, but they also limit the ability of the government to regulate food properly. And if the government were to try to regulate, these deals give agribusiness firms the right to sue the government for taxpayer compensation, thus chilling better policy the next time. This actually happened when a group of Canadian cattlemen sued the U.S. when our government closed the border to beef trade when Canada had an instance of mad cow.

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Privatization as a cure for preemption?

Today's paper reports that the Senate is privatizing its dining room to get around budget losses, and now countries may be privatizing other entities to get around WTO rules. According to Inside U.S. Trade:

The European Union, in recently released comments on a Food and Drug Administration (FDA) inquiry on how third parties can be used to increase food safety, has said that if the FDA recognizes and relies on certifications that firms live up to private-sector standards, it could violate the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) in the World Trade Organization (WTO).

The EU in undated comments explained that though compliance with voluntary standards may lead to compliance with legal federal requirements, private-sector standards often go beyond what is required by federal governments. For instance, some private-sector standards ban the use of certain legally approved pesticides.

Private sector standards, the EU said, are frequently aimed “at ensuring compliance with legal requirements, but in many cases the provisions go beyond what is legally prescribed to cover issues of labor and social rights, production methods or environmental protection and sustainability."

And some developing countries are upset with the U.S. for its reliance on private, third party certifications across a variety of products, which they claim are difficult to keep current with. Public Citizen is generally skeptical of third party certifications, just as we're skeptical of most privatized regulation. But the EU's commentary shows that this issue cuts many ways: what if private sector standards are higher than the publicly enforced standards? What if countries start privatizing regulation in an attempt to get through a loophole in onerous WTO product standard rules? (That's partially what is at issue here: a disagreement about whether private standard setting agencies fall under WTO jurisdiction.)

And there's more from IUT. At ongoing government procurement negotiations at the WTO, countries are struggling how to address so-called “indicative criteria” that define whether government entities have been privatized:

Indicative criteria are an important issue because if government control or influence has been effectively eliminated over a particular entity, a GPA party that removes such an entity from its list of commitments generally owes no compensation. This became an issue when Japan attempted to de-list a railroad entity with the argument that it had been privatized, and the railroad’s status fell under dispute by GPA parties that lacked previously established criteria by which to judge Japan’s move.

Could a country that wanted to scale back its WTO procurement market access commitments do so by feigning some sort of mass privatization or partial privatization? Would progressives support privatization in that instance? Anyway, this is probably too much wonking out for a Monday morning, so I'll go back to my coffee.

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Your baby should put poison in her mouth

... or at least that's the message from the Bush administration this week, according to Inside U.S. Trade:

The Bush Administration sent a letter to House and Senate conferees on the Consumer Product Safety Commission (CPSC) reform bill, H.R. 4040, raising some new objections to both bills but also repeating its long-standing objections to many aspects of the Senate bill....

Image_preview The administration objects to Section 44 of the Senate bill, which it said would cause complaints from trading partners. According to the letter, this part of the bill requires CPSC to prohibit toy imports from manufacturers with a “persistent pattern” of producing toys with substantial safety hazards, while there is no such similar measure taken for domestic manufacturers in the same circumstances. Within the World Trade Organization, members have committed to subjecting imports to the same treatment as domestic products.

The administration also has similar objections to Section 38c of the Senate bill, which allows imports to be refused at the border if they fail to meet inspection and record keeping requirements.

These sections “could prompt complaints from U.S. trading partners and could encourage trading partners to adopt similarly restrictive measures against U.S. exports,” the letter states.

The insidious thing about WTO rules is that 1) they give neoliberal governments the excuse of the neoliberal straightjacket to refuse to take action; and 2) they actually prohibit common sense approaches to policy problems.

For instance, in this case, there's a lot we don't make anymore in these here states, not least of which is toys, as we showed in last year's report. What we do make here, gets multiple levels of regulation. We only have one bite at the apple, so to speak, when it comes to imports. It would make sense for regulators to be able to take action at the border, but instead are subjected to bizarre standards to subject non-existent domestic toy-makers to an additional level of regulatory scrutiny from what they already face (which is not high enough, but is many times higher than what imports face along the supply chain from China).

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Poker and peas

Our lawsuit against the govament is getting some traction in the poker world. According to Poker News:

Public Citizen contends that President George W. Bush's administration is illegally withholding details of its agreement with the European Union, which gives the European Union access to more business sectors in the United States as compensation for the country closing off its borders to online gambling...

They aren't the only ones concerned with the details of the trade concessions. Representatives Barney Frank (D-Mass.) and Ron Paul (R-Texas) joined forces in late March to send a letter to U.S. Trade Representative Susan Schwab requesting the information be released as well.   

Another gaming site asks:

Personally, I find it interesting that Public Citizen would find this issue so important. If anything they appear to be against the WTO and globalization in general, but they apparently hate secret trade agreements even more. Politics makes for strange bedfellows, but at this point, we'll take any help we can get to keep this issue in the news.

Yep, Public Citizen is first and foremost a good government group. Once we get some transparency and democracy, we can haggle over what's good policy. And of course by our count, the WTO has been awful for public interest legislation, with U.S. public interest policies rules against 5 out of 5 times (the global figures are 28 out of 30).

In other news, is CAFTA leading to food smuggling of unsafe peas? Here's the Miami Herald:

Redland fresh-produce importer Fresh King used fake importers, false invoices and rigged lab tests to evade a pesticide alert on imported [Guatemalan] peas, according to a recently revealed federal grand-jury indictment...

Mary Bottari, director of the Harmonization Project at Public Citizen's Global Trade Watch, said voluntary food safety testing was ''totally subject to abuse'' because there were no accreditation standards for the labs and no requirement that the results be sent to the FDA.

''The issue of how these folks can currently buy their own laboratory is one of the single most important things being discussed on Capitol Hill with regards to food safety,'' Bottari said.

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Linda Sanchez v. Bart Simpson

Fair trade champion Rep. Linda Sanchez (D-Calif.) is pushing a bill that would grant U.S. consumers and states greater power to serve legal papers on foreign manufacturers that sell defective products in the U.S. market. As we documented last year, foreign producers can rarely be held liable for damages they cause U.S. consumers, a reality not helped by WTO rules and that has promoted offshoring of U.S. jobs and importation of unsafe products. As Ed Mierzwinski from PIRG put it in his testimony for Sanchez's subcommittee (also on our behalf):

By making it easier to hold foreign wrongdoers accountable, your bill would help consumers gain access to justice and also help equalize pressure on U.S. firms that may bear unequal treatment under our laws.

Of course, your bill importantly does not eliminate any responsibility or liability for U.S. manufacturers, importers, distributors, or retailers. It simply makes it easier for consumers to obtain redress from foreign manufacturers. All wrongdoers should always be held accountable.

Bartsimpsongeneratorphpmj8_2 Last year, for example, Mattel used what I call the Bart Simpson defense (“I wasn’t there, I didn’t do it, and it’s not my fault”) when it initially blamed a third-party Chinese supplier for failing to follow its lead paint requirements on a toy that was later recalled.8 Mattel, of course, under the Consumer Product Safety Act and the Federal Hazardous Substances Act, violated U.S. law by entering the banned hazardous substance into U.S. commerce. It trusted, but failed to verify. Mattel would still face liability even if one of its third-party foreign suppliers also did under your act...

Unfortunately, globalization has provided too many firms in the global supply chain with the wrong incentives: they want to cut corners, they want the cheapest supplier, they don’t do third party testing and they use cheaper, dangerous chemicals instead of safe ones. This has placed consumers worldwide at risk. By strengthening U.S. product safety laws and strengthening the ability of U.S. consumers to seek redress from more wrongdoers, actions by U.S. policymakers can benefit all consumers worldwide, since it will ultimately be more efficient for manufacturers and retailers to supply everyone to meet U.S. levels of safety rather than face U.S. levels of liability.

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Who you calling fatty, fatty?

Indian officials and analysts had some choice words for President Bush (and the US of A) this week, quoted in the NYT, after the U.S. government seemed to blame India for the increase in global food prices:

Pradeep S. Mehta, secretary general of the center for international trade, economics and the environment of CUTS International, an independent research institute based here, said that if Americans slimmed down to the weight of middle-class Indians, “many hungry people in sub-Saharan Africa would find food on their plates.”

Fatboys He added, archly, that the money spent in the United States on liposuction to get rid of fat from excess consumption could be funneled to feed famine victims...

In response to [Bush's] remarks, a ranking official in the commerce ministry, Jairam Ramesh, told the Press Trust of India, “George Bush has never been known for his knowledge of economics,” and the remarks proved again how “comprehensively wrong” he is...

Indians from the prime minister’s office on down frequently point out that per capita, India uses far lower quantities of commodities and pollutes far less than nations in the West, particularly the United States.

As humorous and undiplomatic as some of these exchanges might be, they obscure the underlying cause of the current food crisis: the erosion of food sovereignty and managed food systems by decades of neoliberalism, the WTO in particular. As our friends at the University of Tennessee documented in their groundbreaking synthesis of farm policy from a few years ago:

WTO promotes policy choices that rely on the assumption that some “invisible hand” in agricultural markets will move the sector -- prices, supply, demand, income, structure, distribution, and the works -- to a higher plane if left to the devices of the free market.

Ending today's crisis must become the most urgent mandate of those who write the rules governing domestic and international agriculture and trade policy. The way out lies not in more of the same but in a balanced application of policy measures left discarded in our headlong rush to an imagined “free market” in agriculture.

Farmer prosperity in the U.S. and the developing world is not only possible, it is achievable. It can be ours at less cost and within a shorter time span than the hoped-for benefits of liberalized agricultural trade promised by the wealthy nations of the world to their developing country counterparts. The choice is ours to make: whose future will be protected, and what kind of global food system will be the outcome of U.S. agricultural policy?

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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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WTO gets all up in our safety

When will it stop? First, the WTO was used as an excuse to not pass a tough toy and product safety bill - now, it's been used to block Democratic legislation to have firms that export food and drugs to the U.S. market pay registration fees. According to Inside U.S. Trade, the Europeans are raising a fuss over new legislation by Rep. John Dingell (D-Mich.):

Dingell’s bill opens the door to the FDA accrediting a foreign government to certify the safety of its domestic food facilities, which is similar to the EU system. But it goes much further than EU law in terms of requirements and products covered. While the EU requires safety certification for only designated high risk foods, Dingell’s bill would require every food facility to be certified by either an accredited government or private certifier in order to avoid a 100 percent testing requirement and stringent port restrictions (Inside U.S. Trade, April 25).

On the new fees proposed in the draft bill, the [European Commission] questioned whether they complied with the U.S. WTO obligation that any fee charged should not be higher than the cost of services provided. Dingell’s draft would charge importers a $10,000 annual registration fee, as it would certified labs, and all food facilities would have to pay a $2,000 registration fee.

The commission acknowledged that the EU charges importers fees under EU Regulation 882/2004, but does not do it in the blanket way of the Dingell bill. Instead, fees are charged in proportion to the size of an import shipment, and different weight thresholds are charged at different rates. This mitigates the charges on small businesses, sources said. [emphasis added]

The WTO Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) in Annex C, paragraph 1f states that any fees imposed on imported products should be equitable to fees charged on domestic like products and “should be no higher than the actual cost of the service.” GATT VIII, paragraph 1a, states that all fees “shall be limited in amount to the approximate cost of services rendered.”

I'll be doing a review of Jamie Galbraith's new book "The Predator State" sometime shortly, but he raises a good point in the book about the necessity of standard-setting in the fight against neoliberalism. The corporate ideologue's strategy in legislative battles like the one Dingell is involved in is to first fight the bill, then if that fails, ensure that no standard is set at all by carving out as many companies ("small" businesses, foreign companies) as possible, and then make the method of calculation practically impossible to administer. What are we left with once the carving is done? It's certainly not a standard in the historic consumer movement sense of the term.

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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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Trade On the Trail Tuesday

Over the weekend, the Boston Globe reported "Democrats ply wider range of economic woes: Free-trade focus shifts to consumer struggles." As a consumer group that has worked on trade since the early 1990s, I guess we didn't get the memo that the two issues were separate. In fact, our partners in the labor and fair trade movements have organized a whole series of events in Pennsylvania spotlighting consumers' concerns about imported toy safety (See here and here).

As we show in a recent report, trade deals like the World Trade Organization (WTO) and North American Free Trade Agreement (NAFTA) have grave implications for consumer safety. The deals contain provisions that set limits on import safety standards and inspection rates. The report explains how WTO and NAFTA investor protection rules have eliminated the risks normally associated with relocating to a developing country while instituting a system where U.S. public interest policies can be and have been challenged in foreign tribunals as "barriers to trade," with U.S. public policies being ruled against at the WTO more than 80 percent of the time. Additionally, this consumer issue is also a jobs issue with 74 percent of U.S. toys being produced in China, while wages there are as low as 36 cents an hour – half that of other developing countries and 2.5 percent that of U.S. toy workers.

NAFTA and the WTO have become shorthand for a whole system of international economic governance that serves the corporate – rather than consumer – interest. Candidates should be questioned about what specific steps they will take to challenge the WTO, which not only offshores our jobs, but outsources our consumer protections.

We'll be back on Thursday with more Trade on the Trail!

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Liability in a globalized world

Much of the U.S. consumer movement has encouraged the development of punitive damages, mostly because of the massive holes in our regulatory and social safety net structure. Now, the New York Times reports that other countries are pushing back when asked to enforce U.S. punitive damage awards.

Still, as Europe rolls back its own social safety net, some European analysts are looking more favorably on the U.S. punitive damages' system as a stopgap measure to protect consumers. Ironically, U.S. courts, as reported in the article, are rolling back and limiting punitive damages claims... but with no social safety net to take its place. Seems like both continents are moving rightward, although in Europe, the frog may be getting so slowly boiled that there's less screaming about this issue. In the U.S., we may already be too boiled to tell.

Actually, we're not just moving back to a neutral place where there are no punitive damages. Through trade deals like NAFTA, corporations are actually creating systems of corporate "punitive damages" where the force of the law is used to their enrichment. Occasionally, they're claiming corporate-style punitive damages at the same time that they're using NAFTA to attack traditional pro-consumer punitive damages. From the NYT:

Foreign lawyers and judges are quick to cite particularly large American awards. Julian Lew, a barrister in London, recalled a Mississippi court’s $400 million punitive award against a Canadian company in 1995 with scorn. “It did bring America into total and utter contempt around the world,” Mr. Lew said.

The Canadian funeral home multinational, Loewen, at the bottom of this case actually used NAFTA to try to collect investor-state damages from the U.S. government for the attitude problems of the Mississippi "jury of your peers," in a case that the U.S. lost on the merits (the overall case was won on a technicality). We document the history here. Whatever one thinks of the tactics used by the Mississippi lawyers and judge, it seems like quite an overreach to make the U.S. government liable under NAFTA for these local problems that are just part of the institutional reality of this country.

Also, as we documented in our toy report, corporations are actually using offshoring as a way to limit their liability to consumers. As even the American Enterprise Institute's Doug Besharov conceded:

“[f]or many American claimants, the full enforceability of products liability laws stops at the shoreline. The situation worsens every year as imports fill more and more of the United States market... [the lack of liability creates an] artificial price advantage [that] will help [foreign producers] build market share, at the expense of United States consumers and insurers as well as competitors.”

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Pre-Super Tuesday reflections

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

A lot of folks are offering their reflections the relative merits of the candidates (see here, here, here, and here.) I was able to share mine at San Francisco's NPR station a little earlier today.

As I see it, we should evaluate trade policy on three overlapping dimensions:

  1. Who is affected
  2. How is it made
  3. What are the "surprise" implications for non-trade policy

On the first front, I'm thinking of how our trade policy has resulted in (or not helped us avoid) a skyrocketing trade deficit, largely stagnant wages and farm prices, and the loss of millions of manufacturing jobs, hundreds of thousands of family farms, and an increasing number of service sector jobs. Nearly every candidate touches on this part of the issue - even Huckabee and Romney with their comments on manufacturing. (McCain has spoken about compensating losers through TAA.) With the exception of Ron Paul (who calls for scrapping the WTO, NAFTA, etc. directly), the whole field talks about the losses from trade policy for many people. They are largely silent on the trade-wage connections.

The second category relates to how we make trade policy. For four decades, our trade policy has been conceived under the undemocratic Fast Track mechanism, which takes away Congress' constitutional authority and responsibility to set our trade policy, and gives it to an executive branch that sets the terms and picks the partner countries and writes the deal, leaving Congress only an up or down vote. Obama has talked about replacing Fast Track, while Clinton has said she will hold off from asking for Fast Track until she reviews past agreements.

Finally, as we have long been arguing, trade policy these days is only marginally about trade. Much of the 600-page texts of the WTO and FTAs has to do with how we adopt policies domestically. Thus, a move to universal health care could be challenged as a limitation on market access for health insurance companies. Under our FTAs, investors can demand taxpayer money for public interest policies that limit their future expected profits. Obama has addressed investor-state, consumer protection, and domestic regulation. We haven't heard much from the other candidates on this dimension.

As we'll document in an upcoming report, both the Dem and GOP health care and climate change proposals could face WTO challenge. More specific responses to these and other questions can help voters can make an informed choice.

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Dead parrot vendors in charge of morning after pill safety?!

No, this isn't spam, even if you can't tell from the title. The New York Times had a stellar piece in this morning's edition that looked at how the "morning after" pill is now exclusively made in China, by a company linked to serious poisonings from leukemia and cancer pills. This follows on an equally important story from earlier this week about the FDA's inability to guarantee drug safety:

Computer systems at the drug agency are so inadequate that it can only guess the number of the plants, and it cannot produce a list of those that have not been inspected. The situation is particularly dire in China, which has more drug and device plants than any other foreign nation but where F.D.A. inspections are few.

Because the factory profiled in today's story exports to the US and many other countries, consumer advocates, including our own Dr. Sid Wolfe, are saying, "Every one of these plants should be immediately inspected." I would add to that that we need to overhaul our trade policy to allow our regulatory authorities to bar imports from any country it chooses without running afoul of WTO rules that limit our ability to do this.

Meanwhile, the pharmaceutical industry has been waging a major campaign to push for ever stronger government enforced monopoly patent protectionism and barriers to drug reimportation - a major reason why drug prices in the US are so high. They've been using the boogie man of drug safety problems to keep us from importing from Canada, or Australia. Egats! Not Canada! What this story shows is that we're already as exposed as anyone in Canada could be to the risks from the current drug production system, while not benefiting from the substantial cost savings in their system.

But the story really shows how far we have to go. As an aside, there's been an epidemic here in Global Trade Watch land, with virtually all of our staff coming down with some bug or another that has kept us from coming into work. I can't speak for the others, but I've been spending my time away from the office watching, well, "The Office," and my favoritist Christmas gift, Monty Python's Flying Circus 16-ton Megaset. One of the most famous sketches from the show is the so-called "Dead Parrot sketch," where a salesman attempts every implausible cover-up for the fact of having sold a customer an "ex-parrot":

The explanation of Chinese overseers sounds a lot like this:

Describing the cover-up at the factory, Ms. Zhou, the regulator who led the investigation, said workers did not tell investigators that vincristine sulfate — a drug too toxic for use in spinal injections — had been stored in a refrigerator with materials for other drugs.

“At the time, we didn’t think they had lied to us,” Ms. Zhou said. The deception sent investigators on a two-month hunt for other possible causes of the adverse reactions. “If they had been open about the vincristine sulfate in the beginning, maybe fewer people would have been harmed,” she added...

Mr. Zheng at Peking University said that producing multiple drugs in a single workshop was risky, but that some Chinese companies saw it as a way to save money. “It was an accident,” he said of the Hualian case. “But it was bound to happen.”

That's right, before you buy a parrot, it's your responsibility to ask if it's dead. Corporations simply can't be held responsible for selling you products that will kill you if you don't first ask if they'll kill you. Caveat emptor b4 you dead murderedod. Duh.

In short, it's a complex issue, and the case shows we should be having a national discussion about the costs and regulation surrounding drug safety, and where it makes sense to produce these and other products. Some more international redundancy would seem to be only prudent. Couldn't the morning after pill be made in multiple locations? Should drug makers be able to make pills that cost pennies and sell them to us for hundreds of dollars, while cutting corners on safety to save pennies that harm people? Is it time to overhaul the bizarre incentives that are shaping this protected industry?

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Democracy, science, class

An ongoing debate in legal theory related to trade policy is the use of the so-called "precautionary principle," variably formulated as "better safe than sorry" or "putting the burden of proof" on industry before it introduces new medicines, technologies or processes on the market.

Consumer and environmental groups tend to invoke this principle, based on the notion (however articulated) that corporations, left to their own devices and ability to sway policy outcomes, will advocate for courses of action that devalue human suffering or environmental damage in the name of making a buck. But some legal scholars don't like the precautionary principle. In The New Republic's Cass Sunstein's words:

The precautionary principle should be rejected, not because it leads in bad directions, but because it leads in no direction at all. The principle is literally paralyzing - forbidding inaction, stringent regulation, and everything in between. The reason is that in the relevant cases, every step, every inaction, creates a risk to health, the environment, or both.

Happily for Sunstein and comrades, the precautionary principle is not what prevails under our trade law. The WTO's Sanitary and Phytosanitary Standards agreement - one of 17 that the WTO maintains - reads:

Members shall ensure that any sanitary or phytosanitary measure is applied only to the extent necessary to protect human, animal or plant life or health, is based on scientific principles and is not maintained without sufficient scientific evidence [emphasis added]

There's a lot of background on how to define what is "necessary" under international trade law, but suffice it to say that it's a lot more restrictive than how it reads here. Europe has been learning the hard way about how some of their food policies influenced by the precautionary principle have taken a beating at the WTO.

Continue reading "Democracy, science, class" »

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On art, confronting corporations and regulatory chill

I've been rocking out to some Rage Against the Machine lately. They're a band I had kinda forgotten about for much of the last decade, although like many people of my generation, they were my first exposure to a politics that went beyond the staid participation in ballot box politics that characterized many of the older folk in my life. While my hometown of Louisville was a center for "straight edge culture" much of the early 1990s, RATM had lyrics that addressed that went beyond personal politics and to the interconnections between oppression at home and abroad, and was unflinchingly committed to social change. For instance, take this lyric from 1999's "Ashes in the Fall":

Ain't it funny how the factory doors close
Round the time that the school doors close
Round the time that the doors of the jail cells
Open up to greet you like the reaper

This perspective fits very comfortably with that of HBO's "The Wire," another recent obsession at my household. Art, unlike some of the politics of the policy-making process, can make a clarion call for change that is not bogged down in wonkish qualifications on legislation, for instance. It seems that the art community is way out ahead of the broader progressive community in terms of ability to communicate a message and create a popular desire for change.

By contrast, industry holds hegemonic sway in Washington. At an event held this morning at the Ronald Reagan International Trade Center, representatives from the Bush administration, and toy and retail industries - despite a year of record outcry about imported product safety - brazenly held forth about how, in their opinion, the public and the government has little to no role in regulatory checks and balances. Corporations can do it better. Among some of the choicer quotes:

  • "While we welcome lower lead standards, they are difficult to implement in the next year. We may have already placed our Christmas orders months ahead. We will be covered this year by the same high lead standard that has protected consumers for years."
  • "We think that the recent recalls do not indict the system. On a
    strict numerical basis, we’re consistent with past years. The CPSC is
    getting more efficient… like the private sector, the public sector is
    getting better at doing more with less. The recalls of the last year
    show that the current system of self-reporting is working."
  • "We’ve heard from our supply chain that the costs of complying
    with duplicative testing – and a CBO study confirmed this – increase
    the costs to consumers by 10%. This is not a good thing for consumers."
  • "there’s no credible report of injury from lead inside the
    products… we should focus on hazards that post the biggest threat… it
    would be shame if parents were looking through their toy box while
    ignoring their window sills."
  • "Our economic viability has to do with confidence of consumers,
    with our brand integrity. There are specific complexities to sourcing
    overseas, in addition to the efficiencies and cost savings from this
    vast production capacity. The worst thing that could happen is that we
    turn inward, that we turn protectionist. The marketplace is much more
    complex than the 1950s’ model of domestic supply."

  • There were loads of other good nuggets on the ongoing attemptsby
    Congress to put together a Consumer Product Safety Commission bill,
    including slams on CPSC disclosure to the public of company
    information, on efforts to create a STOP button to block unsafe imports
    at the ports, on an increased role for state attorney generals (who are
    apparently "political people" in contrast to Bush appointee Nancy
    Nord), and the Senate for not getting permission from industry before
    writing their bill.

That industry lobbyists feel they can even getting away with suggesting that parents' safety concerns are not real, or that the industry can self-regulate, just indicate how far we've come from any sense of shared societal responsibilities and class co-existence.

But what's even more disheartening is the reaction from "the other side of the aisle." Progressives on our side are often having the debate while looking at their own feet, fixated on the legislative details while corporations rule the roost.

From inside the halls of Congress, it's even worse. Even though the import safety crisis is THE reason why there's a major CPSC debate this year, the House Energy and Commerce Committee admitted that it wouldn't be addressing the public outcry over imports in its CPSC legislation because World Trade Organization rules block them from addressing the issue.

A lawyer for the committee said that, after consulting with USTR, the Democrats could not come up with a way to increase CPSC's authority over imports, to establish a STOP button that could halt unsafe imports at the ports, or to establish that importers post a bond to cover the cost of recalls - VERY minimal reforms I might add - because 

"We were very concerned that when it came to the trade authority process, we wanted to ensure that no provisions would run afoul of the WTO’s Technical Barriers to Trade agreement ... [on the STOP button] it made us uncomfortable to halt imports under mere suspension of non-compliance. The arbitrary use of this authority might be an unwarranted barrier to trade... [and on the bonding requirement] Our committee staff looked at this issue, and we weren’t able to find a WTO-compliant method of doing this."

It's pretty rare that a policymaker is so candid about their reasons for not adopting progressive domestic legislation. As we document in our latest reports on toy and food safety, the threat from the WTO and other FTAs is real. But the answer isn't to back off of pursuing progressive legislation - the answer is to move forward with, while also renegotiating the international rules. Indeed, the total cave-in of the House on this issue in the latest bill illustrates the folly of moving along just one of the tracks. In short, we need to take away the excuse that our elected officials have for not meeting our desires.

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Rain on the scarecrow as the border blockaded

January 3rd, you know what that means? Only 40 more days until the Dee-Cee presidential primary vote! I can't wait! D.C. has always had a unique role in the nation for our role in the presidential primary process. Sure, there's SOMETHING happening in Iowa today, but it's not until a candidate wins the D.C. primary that they're truly considered anointed.

In all seriousness, voting in America's last inland colony is not today's top news. No, just wanted to remind everyone about the Iowa Fair Trade Campaign's excellent web resource on the candidates' positions on trade, available here.

There's been a lot of paeans to corn ethanol during this season, and with good reason: Iowa's farmers are taking it on the nose. As we've written before,

While the volume of U.S. corn and soybean exported increased as predicted by NAFTA’s proponents, the prices received by American farmers declined to the lowest levels in recent memory. While American farmers received $12.64 per bushel of soybeans (in inflation-adjusted terms) when the NAFTA predecessor Canada FTA went into place in 1988, that price halved to $6.30 by 2006. In inflation-adjusted dollars, farmers received $4.29 a bushel for corn in 1995, the year the WTO went into effect and a year after NAFTA went into effect. But a decade later in 2005, the bushel price was at a low of $2.06, and only started increasing with the recent ethanol boom  – a development that is threatened with derailment as Brazil and other agricultural exporters plot WTO challenges against U.S. corn ethanol subsidies. 

But don't take my word for it... after all, there's a reason that John Cougar Mellencamp is a political figure on par with Oprah in Iowa.

The corn issue in Iowa is connected to the corn issue in Mexico, which has been a lot in the news recently. (See our fact sheet for more.) In particular, the final phasing in of NAFTA tariff cuts in Mexico happened, and folks in Mexico were none too happy about it. (video in spanish)

As we've written about before, Latino civil rights groups are calling attention to NAFTA-style policies, which are destroying the Mexican countryside, which has led to massive displacement of people towards the United States.

As the AP reported,

Mexico's Roman Catholic Church has warned that the changes could spark an exodus to the U.S.

"It is clear that many farmers will have a difficult time competing in the domestic market, and that could cause a large number of farmers to leave their farms," the archdiocese said in a statement issued on New Year's Day.

Dozens of farm activists in Ciudad Juarez blocked one lane of the border bridge leading into El Paso, Texas, to protest the unrestricted imports of U.S. corn, as part of a 36-hour demonstration that started in the first minutes of the New Year.

They had pledged not to allow any U.S. grain into the country...

"The open battle against NAFTA begins," read a banner headline in the daily La Jornada.

In Mexico City, activists announced plans to march through the capital and hold a nationwide conference on Jan. 14 to plan further protests.

"This is going to be a complicated year, and there will certainly be a lot of demonstrations," said Enrique Perez, a spokesman for the National Association of Farm Distributors, one of the groups organizing the marches.

Mexico, the birthplace of corn, obtained a 15-year protection for sensitive farm crops when NAFTA was negotiated in 1993. That protection period ran out on Jan. 1. Mexico still grows almost all of the corn consumed here by humans, but imports corn to feed animals.

Mexican politicians from all major parties agree that a NAFTA renegotiation needs to happen. An area where there might be some common ground with the candidates for president, many who are talking about doing something that sounds an awful lot like renegotiation of NAFTA.

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Import toy safety - where's Congress?

The Democrats rode back to power last November thanks to fairly unified opposition to more NAFTA style agreements. Then, this year, with the imported toy safety crisis, there's been increased calls for overhauling of our 1970s toy safety regulatory policy, premised on a reality when most toys where made domestically.

We already know how a slim minority of the House Dems and a frightening majority of the Senate Dems caved on the first issue, by helping pass Bush's NAFTA expansion to Peru. Of those running for president, only Kucinich and Paul managed to vote right, while everyone else - including Biden, Dodd, Clinton, Hunter, McCain, and Obama - didn't manage to even show up to vote. (Additionally, Tancredo voted wrong.)

Now, it seems they're poised to cave on the second as well. Last night, just a couple of minutes before close of business, the House passed 407-0 a Consumer Product Safety Commission bill that does practically nothing on import safety. (If you want to see what "something" looks like, and why the Wall Street Journal gave us some luv and called us " a hard-liner among consumer groups",  see the recommendations at the end of our latest report and after the jump.)

As far as I know, Rep. Jan Schakowsky (D-Ill) was the only member to even acknowledge the shortcoming:

"I hope we can make this bill even stronger. Even with added resources authorized from the bill, a major improvement from the levels requested by President Bush, we could do better, particularly when it comes to monitoring imports. I support measures to add mandatory premarketing testing and other important things."

Now, the bill goes on to the Senate, where there's slightly stronger but still inadequate bill that has been reported out of the Senate Commerce Committee. As The Hill reported,

Industry lobbyists favored the House version, which some consumer groups said didn’t go far enough to protect consumers...

According to a report released Wednesday by the consumer group Public Citizen, however, neither the House measure nor the tougher Senate version will address one of the main culprits in the wave of toy recalls this year: trade policies that have driven domestic toy manufacturers to move their operations overseas.

'Nuff said. Another case unfortunately of siding with industry over meaningful solutions to the problems facing middle class Americans. (see our full recommendations after the jump.)

Not everyone is as shortsighted, however. As Sen. Bob Casey (D-Pa.) said at today's Pa. news conference on our report,

Sen. Casey is backing a bill in the U.S. Senate that would reform the Consumer Product Safety Commission. However he admits that is only part of the problem. He says changes need to be made when it comes to America’s trade policies because from steel to chocolate, Pennsylvania has been hit hard by companies moving overseas.

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

Continue reading "Import toy safety - where's Congress?" »

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Obama steps up to the plate on fair trade

There's been a flurry of news on toy safety today following our report from yesterday.

The Progressive Magazine asks "will the candidates shut down" Santa's sweatshops?" and puts pressure on some of the candidates for their vote on China PNTR.

Sen. Barack Obama (D-Ill.) responded in a major way, stepping up his fair trade credentials:

Obama said on Wednesday he would ban all toys made in China after a series of safety scares, and he called for tougher U.S. inspections of Chinese imports.

"I would stop the import of all toys from China. Now, I have to say that that's about 80 percent of toys that are being imported right now," the Illinois senator told voters in New Hampshire, which helps kick off the 2008 White House race...

"We have just a handful of people who are inspecting all the toys that are flooding into the country," he said. "The big toy makers now manufacture in China and import here and they have put pressure to resist a strong regulatory system."
Sen. Sherrod Brown (D-Ohio) also held forth on his views on the issue:

Sen. Sherrod Brown, an Ohio Democrat, said toy manufacturers have irresponsibly pushed hard for foreign subcontractors to cut costs.

"We know these products are made in conditions and under an economic regime where there is no emphasis on toy safety," said Brown, who supported the findings of Public Citizen. "It's no surprise they make dangerous toys."...

Brown said "failed trade policy" encouraged U.S. toy companies to move much of their manufacturing overseas to areas with less reliable safety standards.

The World Trade Organization and the North American Free Trade Agreements have provisions in them that provide foreign investor protections and limit product safety standards and inspections, the report said.

"These agreements prioritize ensuring a favorable investment climate for U.S. firms seeking to relocate production overseas to take advantage of sweatshop wages, weak regulatory systems, and cheap product inputs over the concern of most Americans," Public Citizen said in the report.

Brown said the United States can make toys safer by changing its approach in trade negotiations and giving fewer incentives to offshore production.

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

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