El Salvador loses on three out of four counts, as anti-environment and anti-development case launched under CAFTA drags on

El Salvador lost three out of four of its major arguments in last Friday’s Pac Rim Cayman LLC v. El Salvador jurisdictional ruling. Even though it narrowly won dismissal of its CAFTA case, the underlying claims will proceed at World Bank-based hearings as a challenge under El Salvador’s domestic Investment Law.

The lowlights?

• El Salvador lost on three out of four counts, and Pac Rim Cayman LLC's attack on El Salvador's mining policies will proceed. The government may still have to pay millions in tribunal and legal costs for the CAFTA portion that was dismissed.
• CAFTA's extraordinary investment protections kick in for existing investments even without a firm making any new investments after CAFTA went into effect.
• Government actions that predate CAFTA - but continue after it went into effect – can be a "continuing omission" that can keep governments on the hook years later. In this case, Pacific Rim's mining permit was presumptively denied before CAFTA went into effect, but the firm and the government continued to discuss it and the permit remained not granted to date. Following this logic through, a company’s failure to meet a regulatory requirement in the year 1800 can constitute a “continuing omission” attributable to the government (as if it were a contract) for centuries to come, provided the government is nice enough to continue to talk about it. 
• The dismissal of CAFTA jurisdiction was on worryingly narrow grounds: had the firm reorganized its corporate structure so that its pre-existing U.S. corporate entity obtained ownership of the Salvadoran mining interest (rather than Pacific Rim's Cayman subsidiary that owned those assets being reincorporated as a new U.S. entity to pursue the CAFTA case), El Salvador could have been held liable for a CAFTA violation on the basis of a dispute that actually started before CAFTA, just because the governmental authorities were kind enough to keep speaking to the company about their permits.
• Through this narrow dismissal of the CAFTA complaint, the tribunal practically laid out a road map for future aggressive nationality planning companies to abuse the investor-state system to attack environmental policies.

Please find the official docs in this case here, our earlier statement from Saturday here, and our earlier backgrounder on the case here. (See here for our analysis of the closely related Commerce Group v. El Salvador case.)

 ++

As the complainant’s name implies, Pac Rim Cayman LLC started out as a Cayman Islands company. The firm was a subsidiary of Pacific Rim Mining Corp., a Canadian company, that had sought but failed (as of March 2005) to qualify for a gold exploitation license, after having made a tepid but ultimately failed attempt (as of December 2004) to secure the necessary environmental permits.

In March 2006 – long after these facts – the U.S.-Central America Free Trade Agreement (CAFTA) went into effect. CAFTA provides certain outrageous benefits to U.S. investors to challenge El Salvadoran environmental and health measures for cash compensation, outside of Salvadoran courts for acts or omissions that would not be violations of Salvadoran law. The Cayman subsidiary reincorporated in the U.S. state of Nevada in December 2007. In March 2008, El Salvador’s then-president Elias Antonio Saca, gave a speech that various foreign investors deemed as announcing a ban on gold mining. In April 2008, Pac Rim Cayman LLC began threatening to launch a CAFTA claim as an allegedly “U.S.” investor, which they did formally in December 2008. (Canadian investors in El Salvador, in contrast, would not generally be protected by CAFTA.)

Public Citizen statement on ruling in favor of Chevron

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

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

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

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

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

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

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

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

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

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

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

###

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

Good and bad news from your corporate rulers

There's been a flurry of activity recently in the world of investor-state arbitration.

For the uninitiated, these are the foreign tribunals where corporations can directly sue governments for environmental and other policies. These proceedings take place outside of national judicial systems, where corporations can demand compensation from taxpayers for alleged interferences with future expected profits.

This very controversial system has generated some good and some bad news of late.

First, the good news. Last night, the U.S. Court of Appeals for the D.C. Circuit overturned a 2007 investor-state ruling under the U.K.-Argentina Bilateral Investment Treaty (BIT). [HT to Investment Arbtiration Reporter for catching this very quickly.]

Argentina has been hit by dozens of investor-state claims from U.S. and European companies following its 2001-03 financial crisis. (We detail some of these happenings here.)

In the 2007 ruling, Alejandro Garro (U.S./Argentina), Albert van der Berg (Netherlands) and Guillermo Aguilar-Alvarez (Mexico) comprised the panel of three unelected tribunalists that ruled in BG Group's (a U.K. corporation) favor. The panel wrote:

"Argentina adopted certain measures to address its economic, political and social crisis. It is not for this Tribunal to pass judgment on the reasonableness or effectiveness of such measures as a matter of political economy."

Such loving nods to sovereignty are but the preface for the slap-down. The panel wrote that Argentina guaranteed that the energy companies would be paid in dollars at a set rate. When the 2001-03 economic crisis forced revision of the dollar-peso peg (a key recommendation of neoliberal advisors), Argentina was acting "unreasonably" and therefore in violation of the BIT obligation to provide "fair and equitable treatment" (FET).

The panel ordered Argentine taxpayers, many of whom had been pushed into poverty after following the policy advice of the IMF, to cough up roughly $200 million. (This included paying the fees of the company's lawyers. Awesome.)

A U.S. court had jurisdiction to hear an appeal of the investor-state ruling under the U.S. Federal Arbitration Act. National courts hardly ever overturn these investor-state rulings, but the U.S. court wrote:

"Although the scope of judicial review of the substance of arbitral awards is exceedingly narrow, it is well settled that an arbitrator cannot ignore the intent of the contracting parties. Where, as here, the result of the arbitral award was to ignore the terms of the Treaty and shift the risk that the Argentine courts might not resolve BG Group’s claim within eighteen months pursuant to Article 8(2) of the Treaty, the arbitral panel rendered a decision wholly based on outside legal sources and without regard to the contracting parties’ agreement establishing a precondition to arbitration. Accordingly, we reverse the orders denying the motion to vacate and granting the cross-motion to confirm, and we vacate the Final Award."

This is is a positive sign that there are some limits on obscene investor-state rulings. However, U.S. trade and investment agreements don't even have this 18-month requirement, so don't expect any similar overturnings of rulings under NAFTA-style deals anytime soon.

++

Speaking of which, there was a ruling over very similar issues under the U.S.-Argentina BIT that was just recently released to the public. That award came down in favor of U.S. investor El Paso Energy International Company, which ordered Argentine taxpayers to pay out over $43 million.

Dylan Ratigan on Tax Cheating and the Unfair Panama Trade Deal

Check out this HuffPo piece about the Panama trade deal from MSNBC's own Dylan Ratigan:

"If you want to know why politicians are so eager to pass a free trade agreement with Panama this month, type "Panama offshore banks" into Google and look at the paid ads. What you'll see is advertising by law firms and banks that will offer you help to set up a secret corporate structure in Panama immune from taxes.

The State Department knows this. Here's how the State Department described the Panamanian economy in 2006 in a secret memo revealed on Wikileaks.

The Panamanian "incorporation regime ensures secrecy, avoids taxes,and shields assets from the enforcement of legal judgments. Along with its sophisticated banking services, Panama remains an environment conducive to laundering the proceeds from criminal activity and creates a vulnerability to terrorist financing."

Read the whole article.

Bulldozing Democracy One FTA at a Time

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

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

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

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

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

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

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

Fair trader wins in Peru... again. Will US respect the outcome?

Peruvian presidential candidate Ollanta Humala, long a critic of the NAFTA-style US-Peru trade agreement, has won nearly 32 percent of the vote in the first round of voting. This marks the second time Humala has come in first in the first round: in 2006, he won nearly 31 percent of the vote.

Yesterday, Humala's partner on the ticket told reporters that Humala will determine whether past FTAs are compatible with the national interest. Humala's economic team has blasted the U.S. FTA for being between unequal trading partners.

In contrast, former president Alejandro Toledo and vice president Pedro Pablo Kuczynski - who pushed and continue to push the FTA - finished far behind.

Keiko Fujimori, the former president Alberto's daughter, came in second to Humala, and will face him in the run-off election. She has stated that she supports the U.S.-Peru FTA.

As WOLA reports from on the ground in Peru, much is uncertain the weeks ahead. And although many voters remain suspicious of Humala, "he was the only candidate to offer an alternative to the existing economic model, in a country where a significant portion of the population has not benefited from years of steady economic growth."

Now, it is incumbent on U.S. corporations, the Obama administration in the US and the Chavez administration in Venezuela to stay out of the second round of voting, which is set to occur on June 5. Peru is divided enough without all the outside interventions, and U.S. trade policy has been aggravating these divides rather than leading to healing. See here and here.

After the jump, we have a chronology of the outside interventions in Peru's last presidential election. We detail how the Bush II administration pushed through the FTA after Peru's voters had supported two candidates that were pro-fair trade. One of the fair trade candidates, Alan Garcia, had an eleventh hour conversion to support for the FTA, after being courted by Peruvian and international elites.

Cola Wars Beat Drug Wars

The award in agribusiness giant Cargill's NAFTA investor-state attack on Mexico's jobs program was published last week.

The short version: a tribunal of three unelected judges determined that Mexico's efforts to save or create jobs for campesinos in the sugar sector were a violation of NAFTA. Mexico's taxpayers were ordered to cough up over $77 million plus interest, all the judges' and court fees, and to even pay Cargill $2 million for Cargill's own lawyers' costs.

Here's the longer version:

For years, large agribusiness groups have been pushing the use of high fructose corn syrup in soda drinks, despite concerns about the environmental and public health impact. Not only is HFCS opposed on health grounds, it's also opposed by some foodies on taste grounds: witness the growing demand for Mexican Coca Cola, much of which is made with sugar and is said to therefore taste better.

By the late 1990s, Mexico had a whole lot of excess sugar in its market that it hoped to be able to export to the U.S.This pile-up was driving down prices and hurting Mexico's farmers, who were generally getting battered by NAFTA-style rules and in turn driving displacement into drug trafficking or immigration, as President Obama himself noted during the campaign.

Shell, shell, shell companies

Last year, we reported on how a Canadian-Cayman mining company, Pac Rim Cayman LLC, was using the U.S.-Central America Free Trade Agreement to challenge El Salvadoran mining policy. There are seven parties to CAFTA, and none of them is Canada or the Cayman islands.

In the months before launching a CAFTA case, Pac Rim Cayman LLC changed its incorporation from Cayman Islands to Nevada. El Salvador reasonably got suspicious about this convenient change of nationality, and is asking a CAFTA court convened at the World Bank (ICSID) to dismiss the case because of a lack of jurisdiction.

The case represents the most detailed analysis of corporations' "nationality planning" by an investor-state panel under a U.S. trade or investment agreement. Some of the key highlights from El Salvador's most recent objection to ICSID jurisdiction:

"77. In fact, Claimant has been forced to admit that CAFTA was at least a consideration in the decision to change the nationality of Pac Rim Cayman from the Cayman Islands to the United States. Mr. Shrake states, "[a]s part of this overall assessment of the Companies' organizational structure, I also considered the Companies' potential avenues of recourse if a dispute with El Salvador were ever to arise in the future."...

86. On the record there can be no doubt that the main reason to move Pac Rim Cayman to the United States in December 2007 was to gain treaty protection for the existing dispute related to the El Dorado mine. In its Counter-Memorial, Claimant does not dispute the facts: Pac Rim Cayman was not "repatriated" as Claimant asserted in its August 17, 2010 letter to the Tribunal; it has no office or assets in the United States; the capital invested in El Salvador was transferred from Canada; and there were no other changes to Pac Rim Cayman as a Nevada company.

87. Nevertheless, Claimant now alleges that the change of nationality was to save money. But, despite Claimant's suggestion that 2007 differed from other years because Pacific Rim Mining Corp. recorded a big loss, the truth is that Pacific Rim Mining Corp. has a history of losses, including $4.6 million for fiscal year 2005, $6.9 million for fiscal year 2004, and $2.8 million for fiscal year 2003. Moreover, although Claimant claims that the move saved it "the costs of maintaining Pac Rim Cayman in the Cayman Islands," Claimant presents no evidence that the costs of maintaining a limited liability company in Nevada are significantly cheaper than being incorporated in the Cayman Islands.

88. In fact, given the actual costs involved, the assertion that cost savings was the primary reason and access to CAFTA just a convenient afterthought, is hardly credible. According to the Cayman Islands Chamber of Commerce, a non-resident company currently pays between U.S. $488 and $689 to register and as an annual fee in the Cayman Islands, while an exempt company pays between $573 and up to $2400 for companies with maximum shareholder capital. Cost could not have been a major concern. Moreover, Claimant spent at least $575 to register, submit an initial list of managers, and acquire a business license in Nevada...

106. As discussed above and in El Salvador's Memorial, there is no evidence of Pac Rim Cayman having any business activities whatsoever. It is a shell moved around for the purposes of Pacific Rim Mining Corp. This is hardly disputed. All that Claimant argues is: "Pac Rim Cayman is . . . engaged in the substantial business activities of holding and managing investments in El Salvador from its headquarters in Nevada." Even this statement is misleading. The evidence produced by El Salvador clearly demonstrates that Pac Rim Cayman—a company with no employees, no office space leased under its name, no telephone, no office equipment, and no bank account—has no capacity to manage anything. Moreover, while there is no doubt that it is a holding company, Pac Rim Cayman does not even hold "investments" in El Salvador. It holds shares in Salvadoran companies used as investment vehicles by the common parent company Pacific Rim Mining Corp. Pac Rim Cayman's only "activity" is the purely passive holding of shares in two other companies under its name.

107. As El Salvador stated in its Memorial, holding shares in its name cannot be substantial business activity: "every shell company set up by a non-Party national to try to gain CAFTA jurisdiction will have 'holding' activities related to the investments of the non-Party parent company." The denial of benefits provision would be rendered meaningless if merely holding shares or investments qualified as "substantial business activities in the territory of any Party."

108. Moreover, the fact that an officer of the Canadian parent company was located in the United States when he made decisions about what other subsidiaries the Cayman Islands subsidiary, Pac Rim Cayman, would hold, does not amount to business activities for a U.S. enterprise. Like Claimant's other arguments, this would defeat the purpose of a denial of benefits clause. The alleged substantial activities must be connected to the enterprise when it is a national of the Party.

109. Of course, some holding companies may be able to establish that they are legitimate entities functioning within the territory of a Party. Pac Rim Cayman is not such a holding company. This is clear from Claimant's misleading attempt to align itself with the AMTO claimant: "[m]uch like Pac Rim Cayman, AMTO was a holding company with two fulltime employees." In fact, unlike AMTO, Pac Rim Cayman has no employees. In response to El Salvador's request for information ordered by the Tribunal, Pac Rim Cayman was not able to produce any evidence that it pays the salaries of any employees, or even a portion of the salaries of its two managers, who are also officers of the Canadian parent company and paid by the Canadian company and other subsidiaries. In addition, unlike Pac Rim Cayman, AMTO paid income tax and social insurance payments for its two employees, had a bank account, and leased an office for several years during which the investment was made and the dispute arose. The only thing that Pac Rim Cayman and AMTO have in common is that they are holding companies. Pac Rim Cayman has none of the characteristics that led the AMTO tribunal to conclude that AMTO had substantial business activities.

110. Claimant is a shell company, with no employees, no office, and no revenue. Pac Rim Cayman's subsidiaries, PRES and DOREX, are investment vehicles in El Salvador that do not contribute to Pac Rim Cayman having any activities in the United States. The activities of Pacific Rim Exploration, minimal as they are, should not be counted as activities of Pac Rim Cayman, because Pacific Rim Exploration was only moved to be held through Pac Rim Cayman as part of the abusive scheme to gain jurisdiction, at the same time Pac Rim Cayman's nationality was changed from the Cayman Islands to the United States. The only business activity Pac Rim Cayman can claim—"holding" the shares in the investment vehicles in El Salvador—is clearly insufficient.

El Salvador's legal defense is doing its best to ward off the attack on its environmental policies, but the underlying rules on how "investor" is defined by CAFTA and other NAFTA-style agreements are pretty lame. For instance, Pac Rim Cayman LLC, in its counter memorial on jurisdiction, wrote:

"Far from being “passive” vehicles for questionable purposes, holding companies have been described as “the fundamental building block of the global economy,” a “common and legal device for corporate organization [that] face the same legal obligations of corporations generally.” A holding company is a “company formed to control other companies, usu[ally] confining its role to owning stock and supervising management.”...

there is nothing wrong with an investor’s decision to structure its business activities in order to gain CAFTA’s benefits after investing in the territory of a CAFTA Party and before a dispute with that Party has arisen. Respondent itself admits as much, acknowledging that “prospective nationality planning has generally been accepted by arbitral tribunals, even if the nationality of the foreign investor has been selected to gain tax advantages or treaty protection in the event of future disputes.” One such instance
was in the Aguas del Tunari case, where the tribunal noted that it was “not uncommon in practice” to “locate one’s operations in a jurisdiction perceived to provide a beneficial legal and regulatory environment in terms, for examples, of taxation or the substantive law of the jurisdiction, including the availability of a BIT.”...

Penalizing an investor for taking prudent steps to protect itself in the event that the host State later purports to deny CAFTA’s benefits to the investor would only serve to discourage investors from investing in the territories of the Parties, and would, moreover, undermine CAFTA’s purpose of providing for the settlement of investment disputes."

El Salvador had to agree, saying,"As Claimant points out, structuring an investment ahead of time in order to gain treaty protection may be acceptable, but changing nationality after a dispute has arisen in order to qualify for treaty protection is Abuse of Process."

We need a different set of rules to ward off against investor-state challenges from shell or near-shell companies. After all, NAFTA-style deals prohibit countries from requiring foreign investors to give back to the community or protect environment (so-called "performance requirements".) But the deals don't set up any economically meaningful threshold for an investor actually creating a significant number of jobs before they can use NAFTA- or CAFTA-style rights. This is putting investors ahead of the public and national interest, even when they're not making investments.

(Kind of an analogue to the U.S. tax policy debate, where both parties compete to give corporations back money so that they can invest it "without any government meddling", that they go on to hoard rather than invest.)

It is ridiculous that El Salvador is forced to argue about precedents that would have allowed as few as two employees to be considered substantial business activities. While we debate whether the stimulus package created or saved closer to a million or closer to two million jobs, it seems a little ridiculous to be advancing investment provisions of NAFTA-style trade policies that split hairs about whether as few as two employees entitles a company to massive investor rights. And we wonder why the U.S. government has a hard time creating jobs: we've forgotten how to protect the policy space to actually create jobs, either at home or abroad.

But, there's a fair trade way of re-writing these "denial of benefits" provisions of trade deals. We suggest some ways this could be done here.

Argentina Dodges Bullet; Policy Space Call Left for Another Day

A World Bank tribunal has annulled a decision that Argentina has to compensate U.S. investors for measures following the flawed privatization of its gas utilities and a later set of economic crisis measures that affected investors in the privatized utility. (You can read the whole decision over at the Investment Arbitration Reporter.)

The original case, known as Sempra v. Argentina, was decided back in 2007. In the case, Argentina claimed that its economic crisis measures were necessary to protect the country's essential security. The Kirchner administration advocated for an interpretation of the U.S.-Argentina Bilateral Investment Treaty (BIT) that countries get to "self-judge" whether and when such national emergencies arise.

The World Bank panel that decided the original case said that, even though evidence was shared that the U.S. and Argentine governments currently favored a self-judging interpretation of essential security provisions, the fact that predecessor governments either didn't favor such an interpretation, or that they hadn't stated so succinctly enough, was grounds for deciding that the measure was not self-judging. (They also noted that panels at the WTO and other fora had regularly butted their nose in domestic regulatory affairs, suggesting that there would be a high bar conceptually for  a self-judging interpretation.)

This annulment panel held back from deciding whether the BIT allows the government of Argentina to be the judge of whether an economic crisis constitutes a threat to the country's essential security. Instead, the annulment panel wrote:

It is true that the BIT does not prescribe who is to determine whether the measures in question are or were “necessary” for the purpose so invoked – whether, in other words, Article XI is or is not self-judging. But if the measures in question are properly judged to be “necessary”, then there is no breach of any Treaty obligation.

In other words, not only might a foreign panel get to decide when a country's future is at risk, but arguably they also get to decide whether a certain response is "necessary" - a very restrictive term of art in trade law that can put pressure on countries to use light-touch or no-touch regulation.

On the one hand, Argentina dodged a bullet in that it does not have to pay off Sempra for its emergency policies. On the other hand, this latest ruling will offer little lasting comfort to anyone that thinks that the people and their democratically elected representatives, rather than panelists operating outside of domestic court systems (who often seem even less deferential to the "political branches" than our own Supreme Court), ought to get to decide when they face a national emergency without being subject to claims to pay off a bunch of well-heeled corporations for the privilege.

Moreover, as the point about the intentions of previous vs. current governments indicates, Reagan and Bush may have found a way to have their pro-corporate legacy outlast even lifetime Supreme Court appointments: the signing of trade and investment pacts with substantive provisions that promote deregulation and corporate welfare that live on forever... even after voters have voted in governments that campaigned on reversing the Reagan-Bush agenda.

The Building Blocks of Trade Blocs

On Monday the Office of the U.S. Trade Representative (USTR) notified Congress that it would initiate negotiations with New Zealand, Chile, Brunei, Singapore, Peru, Vietnam, and Australia to form a Trans-Pacific Partnership (TPP).  This is the first time that the Obama administration has formally initiated trade negotiations. 

Back in 2006, New Zealand, Chile, Singapore, and Brunei implemented the Trans-Pacific Strategic Economic Partnership Agreement (commonly referred to as the P4), which was originally designed to welcome new nations into the pact, gradually expanding a wider low tariff zone.  After the Bush administration expressed interest in joining the pact in February of 2008, Peru, Vietnam, and Australia moved toward jumping on the P4 bandwagon.

This is something of a new model for negotiating trade agreements, in terms of the U.S. experience.  After the total collapse of the Free Trade Area of the Americas proposal, the USTR shifted to a bilateral trade agreement strategy where it could exert maximum pressure in the one-on-one negotiations.  Instead of biting off more than it can chew, this time the USTR seems intent on taking small bites to create the same failed mega-FTAs.  Inside US Trade explains:

A statement by the U.S. Chamber of Commerce said it hopes the U.S. will join P4 and this would possibly lead, through a process known as “docking and merging,” to a version of the much-discussed Free Trade Area of the Asia Pacific. 

Negotiations begin in March of next year.

FTAs = Destabilization

Fair traders have long maintained that NAFTA-style trade deals promote instability.

The case of Mexico clearly showed this, with massive amounts of post-NAFTA rural displacement leading to sharp increases in immigration and narcotrafficking, leading the country to the brink of failed statehood.

Earlier this month, the thesis was proved again in Peru. In 2007, Peruvian fair-traders warned against signing the FTA, arguing that it would incentivize further rainforest destruction. Sure enough, within months of the deal going into effect, huge parcels of the Amazon were sold off to developers, and indigenous forest-dwellers were locked in a life-or-death battle with the government.

Now, over the weekend, fair trader Manuel Zelaya (president of Honduras) was ousted in the region's first military coup since the Cold War. Opposition to CAFTA ran high in Honduras, but local elites signed the deal anyway. This led to a groundswell of support for a president that kept getting more and more progressive, most recently signing onto the Bolivarian Alternative of the Americas, an alternative to NAFTA-style FTAs. The country's elites wanted to block these changes, so pushed a coup. (More information on how you can take action is available here.)

Looking ahead, as the debate continues in the United States over the Panama FTA, some comments made by that country's peasant leaders are worth considering. He said of the FTA:

In Panama, the poverty rate is nearly 40 percent, and it is even higher for the rural areas (65 percent) and indigenous communities (95 percent). If we experience even a fraction of what happened to Mexico in terms of the flood of subsidized U.S. agricultural products, our rural population will disintegrate and look for any survival option – including immigration to the United States.

This kind of trade agreement will only increase hunger and misery in the indigenous and peasant sectors of Latin America, pushing our countries even faster into the arms of leftist governments, which has already happened in South America proper.

The message is clear: if you want increase in desperation and polarization, push FTAs. If you want preservation of democracy and stability, choose fair trade.

One Way that Uribe is Better than Bush

Doug Palmer from Reuters reports:

President George W. Bush is moving to suspend longtime U.S. trade benefits for Bolivia because of that country's failure to cooperate in drug-fighting efforts in the past year, the top U.S. trade official said on Friday.

The move reflects the increasingly strained relations between the United States and Bolivia under the leadership of Bolivian President Evo Morales.

"The Morales administration's recent actions related to narcotics cooperation are not those of a partner and are not consistent with the rules of these programs," U.S. Trade Representative Susan Schwab said in a statement.

Unfortunately, as CEPR has shown, the Bush administration has all but undermined ANY U.S. government presence in Bolivia by taking sides in the country's internal political debates, and has even politicized institutions like the Peace Corps, which is supposed to be a non-political channel for U.S. kids to do some good around the world. Way to go, W!

Moreover...

"In South America there was unanimous and very strong support for the government. Other countries from the region, left, right and center, don't see the opposition as having a legitimate grievance," said Mark Weisbrot, head of the Washington-based Center for Economic and Policy Research.

Even Colombia's Uribe is backing Evo! What gives, Georgie?

Morales rising: Evo win margin jumps 15% on record of stopping NAFTA-WTO expansion; reasserting control over natural resources

Bolivia’s President Evo Morales was returned to office last week following a controversial ‘recall referendum’ pushed by rightwing political opponents with a landslide victory of 68%.  Morales, the first indigenous president of Bolivia, won by 53% when initially elected in late 2005. The recall vote increased the majority of Morales and his Movement Towards Socialism (MAS) party by nearly 15%.

Morales’ landslide victory exposed the marginality of a vocal bloc of right-wing separatists in the country’s gas and oil-rich regions. Their goal – to get things back to pre-Morales days when a small elite controlled the revenues from the country’s massive energy resources and farm land. And they are desperate to derail Morales' planned constitutional and social reforms, including regaining control of the country’s oil and gas resources and land redistribution for one of the world’s erstwhile poorest nations.

The right wing had two related strategies: breaking the oil-producing lowland regions away from the rest of the country and taking the national oil revenues with and um...throwing Morales out of office. The first avenue is unconstitutional (although that has not stopped them from repeatedly trying) but now they’ve just gotten whomped on Plan B to un-elect Morales.

Media reports of the past week have largely focused on predictions that the defeated right wing would continue to attack Morales despite the massive vote of public confidence, since four key separatist opponents of Morales were also, as expected (and detailed in a report by WOLA here), returned to their regional posts. The significance of Morales’ rising support levels have largely been swept under the carpet: When Morales was elected in late 2005, his 53 victory was by far the largest in the country’s history, making him the first Bolivian leader able to claim an absolute majority. Two years later, his support has grown by a further 15%.

Such numbers suggest widespread support among Bolivia’s indigenous majority and beyond for the approach Morales has adopted to redistribute wealth and resources (as detailed in a recent report by CEPR)

Morales’ campaign for social and economic justice extends beyond Bolivia when the country participates in international negotiations. For instance, when the WTO recently held an invitation-only mini-ministerial for a select 30 countries, Morales’ issued a powerful statement. He said what many excluded developing country leaders were thinking about the attempt to steamroller through a Doha Round WTO expansion most poor countries oppose:

“The WTO negotiations have turned into a fight by developed countries to open markets in developing countries to favor their big companies…The poorest countries will be the main losers. The economic projections of a potential WTO agreement, carried out even by the World Bank, indicate that the cumulative costs of the loss in employment, the restrictions to national policymaking and the loss in tariff revenues will be greater than the “gains” from the “Development Round”.

After seven years, the WTO round is anchored in the past and out of date with the most important phenomena we are currently living: the food crisis, the energy crisis, climate change and the elimination of cultural diversity. The world is being led to believe that an agreement is needed to resolve the global agenda and this agreement does not correspond to that reality. Its bases are not appropriate to resist this new global agenda,” Morales said in a statement
ahead of the talks.

It is just this sort of clarity and principled defense of the interests of his country’s majority poor population that makes the right wing in Bolivia – and in the United States – obsessed with attacking Morales. With Morales and his social change projects facing continued challenges from corporate interests - both domestic and foreign - as well-argued in this CounterPunch essay, the struggle is far from over.

The Punditocracy: Speaking for the Wretched of the Earth

For those of us who get dizzy listening to the circular logic of the paragons of Punditocracy (especially of the capital P variety), Roger Bybee's (Fairness and Accuracy in Reporting) excellent historical round-up of Fareed Zakaria's noxious views on trade and globalization issues offers a welcome breath of cold, clean facts  after some pretty serious doses of post-Doha death vertigo from the 'powers that be'...

Fareed Zakaria, now the highly influential editor of Newsweek International, author of The Post-American World, and host of Fareed Zakaria GPS, constructed a landmark of unintended irony when he regally pronounced that “the downtrodden beg to differ” with protesters of corporate globalization (Foreign Affairs, 12/13/99).

Those who demonstrated against the World Trade Organization at the famous “battle of Seattle” in 1999, he asserted, were displaying the hubris of the “rich and privileged,” who were delivering “a familiar plea for the downtrodden of the world” by challenging the WTO’s promotion of sweatshops and environmental degradation in the impoverished Third World.

In other words, Zakaria denounced the arrogance of those who presume to advocate for the world’s poor—while appointing himself, the son of a prominent Indian attorney and politician, as the poor’s spokesperson. “There’s just one problem: The downtrodden beg to differ,” Zakaria declared.

In his eyes, the Third World’s poor eagerly welcome Western investment on any terms as a vast improvement over their current misery. Microscopic wages, long hours and heartless management in sweatshops, along with befouled air and water, might seem horrific to wealthy Westerners, but are gratefully welcomed by the desperate people of nations like Mexico, China and India. “In fact, if the demonstrators’ demands were met, the effect would be to crush the hopes of much poorer Third World workers,” he declared (12/13/99)...

On globalization, Zakaria zealously denounces opponents of corporate-determined trade agreements as seeking to impose utopian rules for the global economy that are widely rejected, especially by the most wretched of the earth....

Zakaria’s “anti-democratic” and “minority” accusations invert reality in...critical ways....

A recent multinational Chicago Council/ WorldPublicOpinion.org poll (released 4/25/07) found majorities in most poor nations insisting that globalization be accompanied by global standards to prevent a “race to the bottom.”

“Strong majorities in developing nations around the world support requiring signatories of trade agreements to meet minimum labor and environmental standards,” the survey concluded, citing data from China, India, Thailand, the Philippines, Argentina and Mexico. “Nine in 10 Americans also support such protections for workers and the environment.”

Elites in Third World nations, in contrast, staunchly opposed such standards, the study noted:

The leaders of less developed nations have generally opposed including language mandating minimum standards for working conditions and environmental protections in trade deals, arguing that such rules are protectionist and would undermine their ability to compete in major markets such as Europe and the United States.

“It has often been assumed that when leaders of developing countries argue against including labor or environmental standards in trade agreements, they represent the wishes of their people,” added Steven Kull, director of WorldPublic Opinion.org. “However, it appears that these publics would like to see the international community put pressure on their governments to raise their standards.”

These findings directly contradict Zakaria’s simplistic worldview that the free-trade agenda of America’s political and business elite reflects overwhelming public sentiment in both poorer nations and the U.S.

And, closer to home (and to the other salient topic of the day - the upcoming November polls - about which Zakaria is busy confusing the American electorate daily), Bybee reminds us of the ultimate price yet to be paid by those candidates who forget that the people actually know what's going on...

While elites across the globe support unregulated globalization, majorities in both the U.S. and poorer nations essentially seek to restructure globalization so that it benefits everyone—as signified by the flipping of 37 congressional seats in the 2006 mid-term elections from “free trade” advocates to supporters of “fair trade” (Global Trade Watch, 12/13/06)."

Gotta love it when the real elites try to carve their niches by claiming to speak for the poorest of the poor. Frantz Fanon must be spinning in his grave!

Book Recommendation: Evil Hour in Colombia

Ever since we've started working on Colombia, I've been looking for a good single volume history of modern Colombian history. I read Marco Palacios' "Between Legitimacy and Violence," which reads a lot like many Latin American history texts assigned in college, with a lot of emphasis put on an CEPAL-like analysis of import and export trends shaping the political economy.

But for a great single volume at just over 100 pages that is up-to-date that will help you understand what you read in the newspaper, it doesn't get much better than Forrest Hylton's 2006 book, "Evil Hour in Colombia." It briskly surveys the 19th and early 20th century, but the bulk of the book is dedicated to the post-Violencia (1946) history, or the period that Colombia has been at civil war.

Importantly, Hylton also shows how the paramilitary "demobilization" and the decline in killings and displacements in recent years are not the result of things getting better in Colombia, but rather of a more consolidated criminal control of the state apparatus. In other words, put Tony Soprano in charge of a government, and you'll have a criminally-enforced "peace." (As James Vega shows in a piece for The Democratic Strategist, such tactics can often just postpone more civil war.)

There are some shortcomings of the book, mostly having to do with the length. Some characters and their importance aren't explored in great detail. For insance, while Hylton sets out to correct the shortcoming of other histories that "give short shrift to radical popular movements," key moments in popular history like the struggle to create a unified Afro-Colombian movement in the 1980s through today, are scarcely mentioned. But these defects are more than made up for by the brilliant synthesis of material related to civil-military-narcotrafficker relations.

America's backyard gets a carraige house

Military dude plus trade lady plus Julie Sweig (and others) have put out a new Council on Foreign Relations task force report saying that it's time for the U.S. to move past a trade obsessed focus in our dealings with Latin America, and that the Monroe Doctrine is dead. Here's a key clip:

The Task Force finds that trade... and development aid have not and cannot alone lead to sufficient reductions in poverty and economic inequality in Latin America. The growth of the informal sector, while often successful in increasing incomes for the poor, undermines the economic base of Latin American countries and the effectiveness of state institutions, which are critical in addressing the region’s fundamental challenges.

At the same time, you don't get former USTR Charlene Barshefksy to sign off on your task force without the obligatory hail marys at the FTA altar:

The United States should also approve pending free trade agreements with Colombia and Panama. Free trade remains an important policy tool for expanding economic opportunities in the region and the United States. Rejection of these agreements would severely damage close allies, send a negative signal to other countries in the region, give rise to the view that the United States is an unreliable partner, and strengthen countries in the region that espouse anti-Americanism.

Oh yeah, and trade is responsible for the stellar growth in Latin America, which, wait, wasn't so stellar. Can we say that if something good happened it was because of trade, but if something bad happened, trade had nothing to do with it? As a leading presidential aspirant might say, "yes, we can."

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.

Trade on the Trail: Obama v. Uribe

Sen. Barack Obama (D-Ill.) made a speech to the Pennsylvania AFL-CIO yesterday that called for an overhaul of our trade policy. Here's the key quote:

But what I refuse to accept is that we have to sign trade deals like the South Korea Agreement that are bad for American workers. What I oppose - and what I have always opposed - are trade deals that put the interests of multinational corporations ahead of the interests of Americans workers - like NAFTA, and CAFTA, and permanent normal trade relations with China.

And I'll also oppose the Colombia Free Trade Agreement if President Bush insists on sending it to Congress because the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements. So you can trust me when I say that whatever trade deals we negotiate when I'm President will be good for American workers, and that they'll have strong labor and environmental protections that we'll enforce.

Obama touched on two themes that are obvious but rarely spoken in polite political circles: one, there is a severe imbalance in our trade policy against the public interest in favor of corporations; two, that it's a mockery of human dignity to even consider signing a trade deal with a country that is the union murder capital of the world.

The bold statement didn't win him any friends in Colombia's right-wing government, which has attached its hellish political sails to the outgoing Bush administration. According to the AP:

Colombia's president sharply criticized U.S. presidential contender Barack Obama on Wednesday for opposing a trade deal with his country, calling the Democrat out of touch with the realities of the South American nation.

The White House is urging Congress to approve the agreement, which would remove most tariffs on American exports and cement Colombia's preferential trade status with the United States.

But Illinois Sen. Obama said Wednesday he would oppose the deal.

"I deplore the fact that Senator Obama, aspiring to be president of the United States, should be unaware of Colombia's efforts," President Alvaro Uribe said in a statement. "I think it is for political calculations that he is making a statement that does not correspond to Colombia's reality."

Okay, I realize that the news that was trying to be reported here was the Uribe and Obama spat. But to describe the monstrous (what is it about Barack that makes people use that word?!) 600-plus page FTA does far more (and far more harm) that the innocuous-sounding summary "would remove most tariffs on American exports and cement Colombia's preferential trade status with the United States."

For folks covering the campaign, this short blurbs are a great opportunity to move past the horse race and dig a touch deeper on the issue. Here's just a few thoughts for things to insert:

1. If FTAs are just about tariff reduction, why are they hundreds of pages, while only a few pages deal with tariff reduction? What accounts for the opposition of such a wide swath of Americans and environmental and consumer groups who don't work on tariffs? Could it be the corporate privileges which allow foreign investors to claim taxpayer-funded compensation for having to comply with the same public interest laws which domestic firms must comply?
2. What's up with this narrative - paid for by the super-expensive Uribe lobbying outfits - that the Colombia FTA would help our foreign policy initiatives? If voters across Latin America are electing candidates that reject our failed trade model, how is our Latin America policy helped by shoving NAFTA-style trade policy on the one outlier government in the region, and one that doesn't seem to mind playing favorites in our domestic electoral processes? Doesn't sound like much of a foreign policy to me.

Another issue to probe is what role the candidates envision for U.S. multinationals in the global economy. I had the great misfortune to read the cases brought by the estates of murdered Coca-Cola workers against the company. Among the highlights: In 2001, the International Labor Rights Fund and United Steelworkers of America brought a civil case for equitable relief and damages against Coca-Cola and its Colombian bottlers on behalf of the estate of a murdered Coca-Cola plant worker (Isidro Segundo Gil) and of five other plant workers who were tortured, kidnapped and/or otherwise injured. According to the plaintiff’s complaint:

“The claims in this case arise from Defendants’ wrongful actions in connection with their production, bottling and distribution of Coke products in Colombia. With respect to their business operations in Colombia, the Defendants hired, contracted with or otherwise directed paramilitary security forces that utilized extreme violence and murdered, tortured, unlawfully detained or otherwise silenced trade union leaders of the Union representing workers at Defendants’ facilities. The individual Plaintiffs have been subjected to serious human rights abuses, including murder, extrajudicial killing, kidnapping, unlawful detention, and torture in violation of the Alien Tort Claims Act (ATCA), 28 U.S.C. §1350, the Torture Victims Protection Act (TVPA), international human rights law, and the common tort law of the state of Florida. Further, Defendants, their alter egos and/or their agents engaged in a conspiracy to cause physical and mental harm to Plaintiffs in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq.”

In 2003, the U.S. District Court for the Southern District of Florida dismissed this case on jurisdictional grounds. In 2006, a similar case that is still pending was brought against Coca-Cola and its Colombian bottlers on behalf of the wife and estate of another murdered Coca-Cola worker.  The number of unionized workers at Coca-Cola's Colombia plants dropped precipitously after these fear campaigns. As a result, we've seen heightened congressional scrutiny, corporate shareholder protests and university Coke boycotts.

This is the same Coke, ahem, pushing the Colombia FTA. How is doling out legislative victories to corporations that have provoked such animosity abroad helping the long-term interests of Americans? What do the candidates have to say about these crucial issues?

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

Getting into the mud and blood bath and rising sea levels

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

Afro-Colombians reiterate opposition to Colombia FTA

Marino Córdoba, founder of the Association of Internally Displaced Afro-Colombians (AFRODES), has a nice guest blog post at The Hill entitled "Why Afro-Colombians Oppose the Colombia FTA."  The whole post is worth a read, but the juicy tidbits include:

...At the end of 2007, angered by the strong opposition of the majority of Afro-Colombian communities to the U.S.-Colombia Free Trade Agreement (FTA,) Uribe created a new Commission in Colombia that directly challenges our legal governance structure.

Cynically dubbed the Commission for the Advancement of Afro-Colombian People, it would undermine our communities’ ability to advance development strategies chosen by our people that comport with our needs and that help even the economic playing field... President George Bush and other U.S. Uribe allies, such as Rep. Gregory Meeks (D-NY), and the vast array of lobbying firms hired by the Uribe government are now trying to tout this outrageous Commission as evidence that Afro- Colombian concerns are being addressed as they push to pass the FTA.

Córdoba says that thanks to a vibrant civil society movement in the 1980s, Afro-Colombians enjoy full legal recognition of their cultural rights and collective ownership of their lands (he specifically mentions Law 70 of 1993 (PDF), a rather remarkable piece of progressive legislation that I'd encourage anyone to read).  Yet this recognition has been undermined by paramilitary organizations forcing Afro-Colombians off of their land: "Tens of thousands of us have been forced to flee... clear[ing] the way for the entry of oil palm plantations, logging operations, and mining projects advanced by allies of the Uribe Administration."

The Colombia FTA's Chapter 10 contains the same poisonous investor rights provisions as NAFTA, CAFTA and the Peru FTA.  If the FTA is implemented, these provisions will only exacerbate the situation, empowering foreign companies to engage in resource extraction made possible by the illegal and often violent forcing of Afro-Colombians off of their land — land supposedly guaranteed to them by Law 70.

The Colombian Corporate Agenda... from the inside

Today, at an event at the Council of the Americas, a corporate organization, I was introduced to a delegation of corporate CEOs from Colombia: David Bojanini of South American Insurance, Manuel Carvajal of the Carvajal Corp., Antonio Celia of Promigas and Francisco Diaz of the Corona Organization.

The event was introduced as a discussion of whether the "free trade agreement" would help improve Colombia, but amongst the diverse panel made up entirely of CEOs of Colombia's corporations (but from different geographic regions, perhaps? Though not even sure about that...), no one said that the FTA would be a bad idea, omitting the perspective of most civil society groups in Colombia and not leading to much of a discussion.

Each businessman outlined their commitment to improving life in Colombia. Antonio Celia said, "we provide jobs...hoping that they [workers] will be compensated with commitment and personal reward." (I'm sure most Colombians would prefer a living wage)

They also said that as opposed to Mexico pre-NAFTA, Colombia's corporations have a real sense of social responsibility and the problems were different in Mexico. (a  reminder that drugs were one of the major issues during the NAFTA debate and last I heard most of our cocaine still comes from Colombia...?)

Bojanini said that he is "very concerned about the well-being of our employees. We have deep respect for our labor unions - many of our companies have unions. We support free association." (and still the most dangerous country for unionists in the world)

After going on about all the contributions of what they admitted was not a representative sample of Colombian CEOs, Francisco Diaz strained to say, "we're trying to tie this into the FTA..."

There was also the obligatory exchange about Venezuela and Chavez (that "purveyor of false populism" Bush mentioned last night in the State of the Union). The CEOs cited that the #1 market for Colombia corporations is the U.S. and #2 is Venezuela. The businessmen also said that the private sector has no control over this and will continue to send the "wrong signal" by exporting to Venezuela, but the government can't send the "wrong signal" by rejecting the trade agreement, because the top two exporters might switch places and then the world will end!!! ahhh!! This was an especially interesting statement given the frame of this forum as about Corporate Social Responsibility, but I guess by this point they had forgotten the corporate responsibility part...

The CEOs were also excited to announce that they were adopting a few conventions of a Human Rights Code of Conduct that they had written. I would think that since they wrote it they would sign up for all of it, but apparently some of the private-sector written Human Rights Conduct just went too far in supporting human rights.

And then they assured the people around the table including a few reporters that this forum and this trip was in fact "not a PR effort." (Well, at least with only the two reporters who showed up and the arguments full of holes, it wasn't a very successful PR effort.) 

Fun sleepover game: who would you rather have as president?

Bush didn't mention unionists' murders once on SOTU! He did draw that funny conclusion: "If we fail to pass this agreement, we will embolden the purveyors of false populism in our hemisphere." Well, it's nice to know that he believes there can be such a thing as true populism. I wonder what he could be thinking about?

As we've shown time and time again, if avoiding populism is the goal, it's best to not pass trade deals that limit development policy space. Zapatista uprising - born with NAFTA. Chavez's rise to power - born with IMF structural adjustment policies. The same is true country-by-country, across the hemisphere. If take everything away from people but their chains, they're going to have less to lose in rising up against you.

Sadly, it's not only Republicans that buy this Bush line. Democrat Greg Meeks (D-N.Y.), one of the CAFTA 15, also buys much of the same line, and is trying to get more Democratic support. Judge for yourself in this speech in Colombia whether he is up for it. In Meeks' endorsement of Uribe for the U.S. presidency, he presents us all with a major moral quandary: do we want Bush, or Uribe? It makes my head hurt something awful, like I'm reading some sort of poisonous zen koan.

Lotta nice fluff. Also no mention of union murders! If you want to get the other side of the story to the Colombia FTA - the side that does talk about the rampant murders there -  please take a moment and watch this video on the Afro-Colombian struggle there, and also this video "letter" by Chicago activists to Sens. Dick Durbin and Barack Obama.

UPDATE 2:15pm EST: RuthG leaves us a better YouTube link for the Chicago letter, and Public Citizen publishes its detailed response to Bush's state of the union!

When will people get embarrassed about Colombia?

Nobody could accuse the Washington community of lawyers that is responsible for our trade policy of being overly concerned with social justice.

But, c'mon, give me a break. Usually when we have trade debates in this town, they center around making one-way streets into two-way streets, keeping the bicycle of trade moving forward, bashing protectionists and isolationists, engaging not retreating, etc.

Enter the debate around the Colombia FTA. Back in the 1990s, even some Clinton administration officials were cited in the Christian Science Monitor as thinking NAFTA expansion to Colombia was a bad idea - precisely because of the country's ongoing civil war and drug problem. Today, it's no secret that a majority of members of Congress and the entirety of the Democrats' base is utterly opposed to a Colombia FTA, both on the grounds that it's a NAFTA expansion and that it's the biggest unionist-murdering country in the world. In most popular discussions of the pact, this latter fact is THE talking points - people murdered. Thousands of them. With total impunity.

So when the advocates of the Colombia FTA take to the stage, they're rarely talking about bicycles or exports. Their main talking point is that UNION MURDERS HAVE GONE DOWN. Is there no shame?? Who cares if they're up or down... if you had to lead with that fact, you have a problem. In Europe, they have a whole host of social and developmental criteria before you can join the European Union. Not here. The bigger the freak social problems you have, the better.

A Republican at an event I was recently at put it bluntly: how many fewer murders do you want to see before you pass the FTA? What's the specific target? Some Dems in attendance had to respond that they would be glad to expand NAFTA to Colombia, but "more progress [on murder] needs to be made." It's like the saying about porn, I guess the Dems'll know sufficient murder reduction when they see it. Problem is, none of us'll know beforehand. Might it be time to get beyond the country-specific critique and blast the failed model instead?

All these change agents, and I still can't break a 20

The growing usage of the phrase "change agent" has to be the oddest and most incongruous adaptation of radical thought into recent American political discourse. For many folks on the left, some variation of the phrase "change agent" has denoted the working class, the multitude, oppressed nationalities, etc. Overnight, everyone from Mitt Romney to Hillary Clinton assumes the mantle previously given to very large, very strategically placed groups of people.

Whatev. Here at Global Trade Watch, as we are apt to disclose, we have no preference among the self-designated change agents. What we are concerned about is how the struggle for a break from the neo-liberal policies of the past is informing or being informed by the horse race now moving on to South Carolina, Nevada, Michigan and beyond.

The good news is that many of the candidates, including last night's victor Hillary Clinton, are coming up with specific ways that they would change trade policy, as the Iowa Fair Trade Campaign documented in the letters it received from the candidates.

One of the major issues that a new president will likely have to deal with is an economic recession, and they will have to come up with ways to deal with the problem. Corporations have worked hard to ensure that constraints are put on the ability of people to democratically determine how they get themselves out of a recession. Thus, while many of the candidates banter on about international labor and environmental rights that are largely unenforceable in current trade policies, relatively short shrift has been given to the ability to break from NAFTA-WTO style policies during times of national crisis.

In last year's debate over the Peru FTA (and the 2006 debate over the Oman FTA), some attention was given to trying to come up with policies that would safeguard the ability of the U.S. government to block without FTA challenge any takeover of U.S. ports by foreign entities. The "great leap forward" given by our fearless leaders in Congress (they're like 535 little change agents!) was to insert a clause into the "revised" Peru FTA that read:

"Nothing in this Agreement shall be construed: ... to preclude a Party from applying measures that it considers necessary for the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests."

Some are claiming that this allows "full non-challengeable authority" for the U.S. to do whatever it wants if it invokes this so-called "national security" exception.

Unfortunately, the history of these clauses are a little murkier, as this law review article shows. Take the case of Argentina. In 2001-02, the country of my childhood went through an economic recession on par with the Great Depression. The government took a series of measures that it deemed necessary to insulate it's citizens from the worst aspects of the recession - a regulatory move that has made it the target of countless challenges from multinational corporations. These corporations, including Enron, have used NAFTA-like provisions in so-called bilateral investment treaties (BITs) to go after the country in foreign courts and demand billions in Argentine taxpayer dollars. Their gripe? Argentina making use of these so called "non-precluded measures" during a time of national emergency.

As the aforementioned article by William Burke-White and Andreas von Staden argues, even though the U.S. and other countries have tried to move closer to a clearly "self-judging" standard on these "non-precluded measures", the case history shows a lack of agreement among the corporate trade elite about this discretion.

When Enron sued Argentina, for instance, the corporate trade tribunalists ruled that Argentina could not decide for itself what measures it could take during an economic recession (and avoid challenge and compensation claims). But in a very similar case brought by LG and E, the tribunal ruled the exact opposite way. (See pages 106 and 4 respectively). Both these cases were brought under the U.S.-Argentina BIT, which is like the investor-state regime inserted into NAFTA-style trade agreements.

Anyone still think we're immune from what our corporations have gotten written into pacts that we're party to? Anyone who still thinks it's a good idea to offer up sovereignty to such a fickle, unelected grouplet of trade specialists? Anyone who still buys the idea that you can offer up whole swaths of the U.S. economy and regulatory structure to FTA dictates, and then hope and pray that clever exceptions will stand up when the corporate class wants to teach democratically elected leaders a lesson? (As Sirota points out, they're already in the ginger phase one of that lesson here in the U.S.)

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.

Christmastime for corporations (in Germany, err, here)

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

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

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

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

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

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

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

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

National Latino Congreso to Congress: Oppose Bush's NAFTA Expansions!

NEWS RELEASE, October 7, 2007

National Latino Congress Unanimously Passes Resolution Calling on U.S. Congress to Stop Signing New Trade Agreements

Latino Leaders Say U.S. Cannot Address Immigration without Changing Course on Failed Trade Policy

Los Angeles, CA – Reflecting on the root causes of poverty and migration in Latin America, the National Latino Congreso has unanimously approved a resolution rejecting new trade agreements based on the North America Free Trade Agreement (NAFTA), and calling on the U.S. to change its international economic policies, which so far are largely to be blamed for producing wealth and income inequalities abroad, as well as at home. In the case of Latin America, policies promoted by the U.S. have also resulted in the impoverishment and displacement of millions of rural inhabitants.

The resolution adopted on Saturday Oct. 6 by delegates of the Second National Latino Congreso , comes at a moment in which the U.S. Congress considers a new trade agreement with Peru, which largely mirrors NAFTA. The adopted resolution reads, in part:

“Therefore, be it resolved that the organizations present at the 2007 Latino Congreso, are strongly opposed to expanding the failed NAFTA and CAFTA through the “free trade” agreements between the United States and Peru, Colombia, and Panama, and will mobilize our constituencies to work in vehement opposition to their passage, and call on the U.S. Congress directly to reject these agreements.”

The resolution specifically condemns national lawmakers who are attempting to push anti-immigrant legislation while continuing to push for expansion of trade and economic policies that force families to emigrate in the first place. More than 1,000 Latino leaders present applauded the passage of the resolution, calling it an important step towards addressing the obvious link between current U.S. trade and economic policies, and migration.

Close CAFTA Vote Shows Failure of NAFTA Model

Here's our statement on the results, followed by the more recent numbers by region:

For Immediate Release:                   
Oct 8, 2007

Close Tally on CAFTA by Costa Rica in First-Ever Public Vote on a NAFTA Expansion Shows That Bush Administration's Continual Push for These Deals Hurts U.S. Foreign Policy in Latin America

Even After U.S. Threats Aimed at Stimulating Public Fear of Reprisal and Big-Dollar Campaign Pushing ‘Sí' Vote, Result Is Marked by Razor-Thin Margin

WASHINGTON, D.C. – The depth of public opposition to North American Free Trade Agreement (NAFTA)-style pacts was demonstrated Sunday by Costa Rica's massive "no" vote to CAFTA despite a intensive campaign led by the country's president, months of deceptive radio and television advertising in favor of the pact, and a threatening statement issued Saturday by the White House, Public Citizen said today.

The strong vote against CAFTA likely will fuel growing opposition to another Bush proposal now before Congress to expand NAFTA to Peru. The Peru Free Trade Agreement (FTA) contains the same foreign investor privileges, service sector privatization, agriculture and other provisions that fueled Costa Rican public opposition.

"That nearly half the public in Latin America's richest free-market democracy opposed CAFTA despite the intensive campaign in favor of it should end the repeated claims that pushing more NAFTA-style free trade deals is critical to U.S. foreign policy interests in the region or helps the U.S. image," said Lori Wallach, director of Public Citizen's Global Trade Watch division. "This vote also debunks the claim that these pacts are motivated out of U.S. altruism to help poor people in trade partner countries, given that many of the people in question just announced that they themselves don't want this kind of trade policy. This policy, supported by the elite, will help foreign investors seize control of their natural resources, undermine access to essential services, displace peasant farmers and jack up medicines prices."

Fair traders for trade and intact machines

Folks trapped in a flat world mindset may think all this hub hub about fair trade is some sort of disguised attempt to smash the machines and shut down the borders.

That’s so 1990s. Consider just two examples from this week.

Case study 1: Costa Rican voters will vote on Sunday in the world’s first popular referendum on a trade deal (CAFTA). Polls show the “no” vote with a 12 point lead, despite the Bush administration’s considerable bullying and threats. And the hundreds of thousands of people that have filled San Jose’s streets for the “no” campaign aren’t asking for a shut down of trade, but a renegotiation so that human, labor and environmental rights can be put in, and a lot of the bad NAFTA-style provisions taken out.

Case study 2: Just this afternoon, leading fair traders in the U.S. Congress showed yet again that they’re not anti-trade, they just want a different model of trade. Reps. Raúl Grijalva (D-Ariz.) and Linda Sánchez (D-Calif.) announced plans to introduce a bill to make permanent the tiny fraction of Costa Rica’s duty-free market access that isn’t already. These benefits would be extended to nearly two dozen countries, including desperately poor Haiti. This move puts the kibosh on the Bush threats that preferences would expire, which, as I argue here, were based on lies anyway.

In fact, there’s a growing sense that, in order to save our foreign policy, we’re going to have to move away from the NAFTA-CAFTA model, which has been a largely destabilizing factor in Mexico and had painful economic costs. Sen. Bernie Sanders (I-Vt.) articulated this well in his Wall Street Journal op-ed earlier this week, as did Sen. Sherrod Brown (D-Ohio) in a moving floor speech:

Reps. Charles Rangel (D-N.Y.) and Sander Levin (D-Mich.) echoed some of these themes in a statement today (you can read it after the jump), as did Nancy Pelosi and Harry Reid earlier in the week. So did Rep. Mike Michaud (D-Maine) in a letter sent just last night to Costa Rica:

There is a growing sense in Congress and among the American public that threatening our neighbors to our South with reprisals for seeking their own economic path after a generation of lost income growth is a strategy that has largely backfired and undermined the U.S. reputation in the region.

Indeed, whoever our next commander in chief ends up being, if they want to re-establish U.S. credibility in the region, they’re going to have to start paring back the harmful interventionist habits and the trade and aid conditionalities and rules that limit local economic development. 

Bolivia, Venezuela and Nicaragua to World Bank: "Go away"

Bolivia, Venezuela and Nicaragua have announced that they are pulling out of the World Bank's International Center for the Settlement of Investment Disputes (ICSID). Under the investor-state procedures set up under NAFTA and similar agreements, foreign companies are allowed to sue sovereign nations at ICSID if they feel their "expected future profits" are endangered by domestic policy.

Perhaps the most infamous ICSID case is the Bolivia water case, in which privatization of the water system in the city of Cochabamba led to massive rate hikes, violent protests, the repeal of watter privatization legislation, and then the company in question suing Bolivia in the ICSID for $25 million in lost future profits.

Obviously not wanting to expose themselves to further such cases in this undemocratic body, these three countries are considering a proposal from Bolivia's President Evo Morales that would "emphatically reject the legal, media and diplomatic pressure of some multinationals that ... resist the sovereign rulings of countries, making threats and initiating suits in international arbitration."

Given that Nicaragua is party to the Central America Free Trade Agreement (CAFTA) signed in 2005, which includes investor-state provisions that allow foreign companies to utilize ICSID, it'll be interesting to see how the United States responds to this move.

For more on the investor-state issue, check out "Challenging Corporate Investor Rule" (PDF), a new report from the Institute for Policy Studies and Food and Water Watch. This report

"documents how private investors have used [investor-state] right[s] to demand compensation for government actions that diminish their potential profits, including public interest regulations. The report summarizes ten of the most controversial suits, including one pending against the U.S. government over California state measures to reduce environmental damages from a Canadian-owned gold mine. "