Global Trade Watch's Director Lori Wallach in the Huffington Post

Trade Deals: Backdoor Financial Deregulation

Wall Street has a new power tool to demolish financial stability policies, and it comes from a source many would not expect. It's not the cozy relationship between Wall Street and some members of Congress, or the hordes of bankster lobbyists who roam Capitol Hill. Wall Street has obtained and is now pushing for more powers to challenge U.S. and other nations' financial regulations via the international agreements that it has sold to a skeptical American public under the appealing brand of export-expanding "free trade" deals.

In Sunday's New York Times, Gretchen Morgenson described how the financial provisions of the World Trade Organization (WTO) and NAFTA (the North American Free Trade Agreement) operate as backdoor deregulation instruments. Those of us who have studied these so-called "trade deals" understand that these agreements have very little to do with trade per se. Rather, they mainly include new rights for corporations and new constraints on governments' non-trade regulatory policy space.

As my piece in a special edition of the American Prospect shows, instead of following through on President Obama's campaign commitments to fix this backdoor corporate power grab, now the administration is rushing to massively expand this mess by completing a Trans-Pacific Partnership (TPP) deal now being negotiated behind closed doors with eight Pacific Rim nations.

To read the rest of the article click here or go to http://huff.to/GHOXUd

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NAFTA a way to restart Keystone Pipeline?

The Obama administration made a lot of us environmentalists happy with yesterday's decision to reject the Keystone XL pipeline.

Given that the Canadian government and corporations appear to be steaming mad about this, it's worth all of us reflecting on what their next move could be. A NAFTA case, for one, does not seem out of the question.

(If it seems far-fetched that Canadian entities might pursue these options, think of how much energy they've put into this pipeline. Compare this with how relatively little energy they've put into opposing U.S. financial regulations, yet in that case, they've already threatened to invoke NAFTA to derail the Dodd-Frank financial reform legislation.)

On what basis might a Canadian corporation, say, challenge the decision to reject the pipeline? The pending case against the Sultanate of Oman brought by U.S. investor Adel A Hamadi Al Tamimi under the US/Oman FTA is instructive. (That FTA is modeled on NAFTA.)

Mr. Al Tamimi is a UAE native, naturalized U.S. citizen and real estate developer in New England who invested in Oman through two UAE shell companies.  In 2006, his companies concluded ten-year lease agreements with the Oman Mining Company LLC (OMCO, a state-owned enterprise) related to a limestone quarrying/crushing operation.  OMCO committed to “use its best endeavors” to obtain “the necessary environmental and operating permits.”  In August 2007, OMCO told al Tamimi’s companies that the permits had been obtained, and that he was contractually required to commence operations,  which he did in September. Within weeks, officials from the Commerce and Environmental Ministries told al Tamimi that the final permits had not been obtained, and various stop-work orders were issued. 

As al Tamimi states, “OMCO now had to make a choice: it could fulfill its obligations under the Lease Agreements, which would mean disobeying or confronting the Environmental and Commerce Ministries, or it could use whatever leverage it had over the Companies and exert every effort to get them to suspend their operations until a solution could be found to the permitting issues. It chose the latter.”

By April 2008, al Tamimi had ceased operations.  Al Tamimi racked up various environmental fees, which he apparently did not pay.  In April 2009, OMCO told al Tamimi that he was in violation of environmental laws,  and in May 2009, he was arrested.  After being convicted of stealing and breaking environmental laws by a criminal court in November 2009, his conviction was overturned by an appeals court in June 2010.

Tying this back into the FTA rules... In 2011, al Tamimi launched an investor-state case under the Oman-U.S. FTA. He alleges that Oman expropriated his property rights by terminating the leases and bringing “the full force of the police power of the State to ensure cessation of all activities…”  He additionally claims that Oman undermined “his legitimate expectations” that he would be able to conduct quarrying operations and failed to provide “protection and security,” in violation of the U.S.-Oman FTA’s fair and equitable treatment (FET) standard.  He also says that other quarrying operations which he “believes to be owned and controlled by nationals of Oman” have been allowed to operate quarrying operations, in violation of the FTA’s national treatment obligations.

Similar arguments could be constructed in the Keystone case under NAFTA. TransCanada could point to a long string of overtures by the U.S. government that led it to develop "legitimate expectations" (as that is defined under trade law) that it would be able to build the pipeline, going from the private assurances in favor of the pipeline (recently revealed by FOIA documents to Friends of the Earth) and ending in the December 2011 payroll tax cut (which included Keystone-related provisions).

Those "expectations" could be then measured against what could be characterized under the FET standard as an arbitrary decision-making process, as when the Obama administration delayed the pipeline decision in November 2011 until after the presidential election.

TransCanada could point to some domestic pipeline operators that have not confronted similar hurdles as a basis for a National Treatment claim under NAFTA, while they could point to any lost expected future earnings as a basis for an "indirect expropriation" claim.

Stranger cases over much smaller sums of money have been launched before. There's been an outrageous string of cases against El Salvador over mining permitting issues. Over $350 million in compensation has already been paid out to corporations in a series of investor-state cases under NAFTA-style deals. This includes attacks on natural resource policies, environmental protection and health and safety measures, and more. In fact, of the over $12.5 billion in the 17 pending claims under NAFTA-style deals, all relate to environmental, public health and transportation policy – not traditional trade issues. For a full rundown of these NAFTA-style cases up until now, see this link.

If all of this seems like an outrage, it is. And what's worse is that the Obama administration is considering putting similar investor rules in a NAFTA-style deal with nine nations, called the Trans-Pacific FTA. Stay tuned for more on this!

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Bankers Trying to Use NAFTA to Kill Financial Reform

Remember the Volcker Rule? Proposed by former Federal Reserve Chairman Paul Volcker and endorsed by five former Secretaries of the Treasury, it aims to prohibit commercial banks from trading stocks, bonds, currency, and derivatives for their own profit. (Customers of banks could still ask their banks to buy and sell these financial instruments if the customers front the cash.) Banks' risky trades played a huge role in the development of the 2008 financial crisis and precipitated the bailout for these overextended banks.

A form of the Volker Rule made it into the Dodd-Frank financial reform bill that became law in 2010, but bankers are trying to cripple the rule as regulatory agencies write the details of how the rule will work. The Investment Industry Association of Canada has raised the possibility of attacking the Volker Rule with NAFTA. In a letter sent to the Federal Reserve last month, the Association claims:

[T]he Volcker Rule will clearly interfere and raise the costs of cross-border dealing in Canadian securities. As a result, the Volcker Rule may contravene the NAFTA trade agreement.

The Investment Industry Association of Canada perfectly illustrates how "trade" agreements can reach inside nations' borders and interfere with public interest regulations that have nothing to do with the flow of goods between countries. Since NAFTA was enacted, bankers have gotten much more aggressive in their attempts to block regulation through trade deals. For example, the Korea FTA, passed by Congress in October, included much worse restrictions on financial sector regulations than NAFTA. On top of that, the General Agreement on Trade in Services of the WTO has its own set of rules that conflict with policies on capital controls, bans on risky financial services, size limits on banks, and “firewalls” between banking and investment services.

Necessary efforts to make our financial system stable like the Volker Rule may continue to run into obstacles unless we have a turnaround in trade policy to protect, rather than restrict, the right of governments to regulate in the public interest.

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Program to Give Access to NAFTA Trucks Violates the Law

TruckPublic Citizen, the Teamsters, and the Sierra Club filed an opening brief earlier this week on our lawsuit to stop the Obama administration's illegal program to allow unsafe Mexico-domiciled trucks to travel throughout the United States. It's the latest development in the story about how NAFTA may force the United States to lower its highway safety standards by permitting Mexico-domiciled trucks on its roads.

NAFTA included a requirement that all three countries’ highways be fully accessible to trucking companies based in any NAFTA nation by 2000, an item pushed by large U.S. trucking firms seeking deregulation and lower wages. However, the Department of Transportation studies have found that Mexico-domiciled trucks have much worse safety records than U.S. trucks, so public opposition has stymied attempts to open all U.S. highways to these trucks. In 2007, Congress put strict conditions on any pilot program that would evaluate the performance of Mexico-domiciled trucks on U.S. highways.

The Obama administration chose to ignore some of Congress’s conditions when it initiated a pilot program this October. Under the program, Mexico-domiciled trucks entering the United States do not need to show that they are built to U.S. safety standards, nor do drivers of these trucks need to meet all physical standards required of U.S. drivers. Furthermore, the administration did not follow proper procedures when conducting an environmental impact assessment. The program does not even serve its stated purpose of evaluating the ability of Mexico-domiciled trucks to operate safely in the United States, since there is no plan to collect a statistically valid sample of program participants. Finally, Congress insisted that any pilot program achieve comparable access for U.S. trucks in Mexico, but due to the limited availability of certain fuels, the program does not guarantee reciprocal access to Mexico for U.S. trucks.

For more background on NAFTA trucks, visit our landing page on the issue.

(Image courtesy of the Missouri Department of Transportation)

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Sherrod Brown Tosses the Panama FTA

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

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

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NAFTA is the One Ring of our Democracy

Steven Pearlstein and Paul Krugman have nice pieces about the 25th anniversary of the Economic Policy Institute, arguably the leading labor market-focused center-left economics think-tank in D.C.

A prominent narrative is that EPI has grown to prominence for its analysis of the factors driving inequality, including trade policy. As Pearlstein writes:

While EPI and its labor allies have clearly lost the policy battle over free trade, economists have finally come around to its view that trade has had a significant role in widening the U.S. income gap. Even the Institute of International Economics acknowledges that some of the $1 trillion in benefits the U.S. economy gets every year from trade should be used to help the millions of workers who are hurt by trade.

Krugman chimes in on this point:

Since Pearlstein makes a point of mentioning some ancient disputes I had with EPI, I guess I should say something about where all that stands. The main thing, I think, is that trade policy — where I still have some differences with EPI — is much more peripheral an issue than it seemed to be in the early 1990s. I once had a conversation with Bob Kuttner in which we agreed that while we were arguing about NAFTA, Sauron was gathering his forces in Mordor.

If the point is that NAFTA and similar deals are not the only cause of rising inequality, I couldn't agree more. But that's actually the wrong question to be asking. The main raison d'etre of NAFTA-style deals is to set in place a body of rules that become the "new normal" in domestic regulation and international law. As Lori Wallach and I write in a piece published in the American Prospect yesterday:

Since NAFTA, trade agreements have grown to encompass thousands of pages of text, and only a minority of the provisions deal with tariffs—trade policy’s historic remit. Today’s so-called “trade” deals set constraints on how governments can regulate inside their own borders. For instance, the recent pacts ban "Buy America" policies that ensure tax dollars are used to purchase American-made goods and allow corporations to challenge environmental policies for cash compensation. They include such severe limits on financial regulation that the financial services industry celebrated the Korea deal in particular as “the best financial services chapter negotiated in a free trade agreement to date,” according to Citigroup.

These constraints on domestic regulation have a corrosive effect on democracy, and begin to shift the center of political gravity away from elected officials and towards unelected global bodies and corporations. Over time (and we see this every day on Capitol Hill), policy proposals are watered down in order to avoid conflicts with our trade agreements. 

Krugman and Kuttner are right that NAFTA is not to the labor market as Sauron is to Mordor. Rather, NAFTA and the WTO are to our democracy what the One Ring is to Mordor. Sauron, in this analogy, represents corporations.

As Tolkein fans know, the One Ring was designed by Sauron, and draws whoever bears it back to his Oneringdarkness. Its inscription reads: "One ring to rule them all, one ring to find them, One ring to bring them all and in the darkness bind them." The ring represents a set of dark rules that are difficult if not impossible to wield for good, and were designed with Sauron's narrow interests in mind (not all of Mordor's).

Our trade agreements provide the legal and ideological underpinning of neoliberalism. Our government (like Frodo) put these shackles on voluntarily, but now it finds its trajectory negatively influenced by the force. It is of course difficult to hypothesize whether neoliberalism would be destroyed if we got rid of NAFTA-style deals or the WTO. But the system's proponents would have to justify their corporate goals on some basis other than "it's the law."

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

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

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

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

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

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Click here for the full article.

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Op-Ed Round-Up

Here's a round-up of some of the best opinion pieces over the last couple of months about the pending trade deals:

 

The Hill masthead

U.S.-Korea trade deal is bad for both countries

By Chun Jung-bae, National Assembly of the Republic of Korea

"There is some rosy fantasy that the pending U.S.-Korea Free Trade Agreement will create tens of thousands of well-paying jobs in both countries and strengthen and expand the U.S. relationship with Korea. This is a fabrication of multinational corporations that have no allegiance to either country. As a member of the Korean National Assembly, I would like to set the record straight: In reality, the deal is lose-lose."

Read the entire piece here.

 

Seattle_times_logo 

Congress should reject proposed trade agreements and insist on better policies

By Lynne Dodson, secretary-treasurer of the Washington State Labor Council, and Kathleen Ridihalgh, senior organizing manager of the Sierra Club in Washington and Oregon.

"The definition of insanity is doing the same thing over and over and expecting a different outcome. This summer, insanity reigns over proposed U.S. trade agreements with South Korea, Colombia and Panama. For more than 20 years, "free" trade agreements have systematically undermined the American economy and the middle class. The growing disparity between the "haves" and "have nots" is turning the American dream into a nightmare. It is a direct result of our failed trade policy, and it needs to stop now."

Read the entire piece here.

 

SacBeeLogo

US-Colombia free trade agreement bad idea for both countries

By John I. Laun and Cecilia Zarate-Laun, Colombia Support Network

"In the coming days, the U.S. Congress will be debating a free trade deal between the United States and Colombia. The agreement, if finalized, will have a negative impact on both countries. It will not lead to job creation in the United States. Instead, it will cost U.S. jobs, as multinationals will relocate to Colombia in order to avoid paying higher wages here. But Colombia will not benefit, either."

Read the entire piece here.

 

HuffPo logo

Trading Our Future: Tax Cheating and the Panama Free Trade Agreement

By Dylan Ratigan, host of MSNBC's "The Dylan Ratigan Show"

"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."

Read the entire piece here.

 

Knoxville-news

Free Trade Pacts Will Cost Tennesseans Jobs

By Robert E. Scott, director of trade and manufacturing policy research at the Economic Policy Institute

"Based on past U.S. experience with NAFTA and other trade agreements, I have estimated that the U.S.-Korea and Colombia FTAs will displace 214,000 U.S. jobs. These job losses will fall hardest in industrial states like Tennessee. Workers there would be well-advised to think twice before supporting these job-displacing trade agreements."

Read the entire piece here.

  

MilwaukeeJS logo So-called 'free' trade agreements harm American workers

By Steve Kagen, doctor and former member of Congress from Appleton, Wis.

"Professional politicians in Washington and their partners on Wall Street are lining up for another payday - this time by promoting 'free trade' deals with Korea, Panama and Colombia. But if you're not in Washington or on Wall Street, there's a problem. These new deals are just like the old deals. They are job-killers - just like NAFTA and CAFTA before them."

Read the entire piece here.

 

Bangor_Daily_News_Logo 
 
Say no to new trade deals and start over

Editorial

"If so-called free trade is not done right...the only winners are corporations without borders. The losers are the people who live and work in those developing nations and the American blue-collar workers who see jobs leave the States. ... There is a good reason that both Maine tea party groups and organized labor oppose the South Korea, Panama and Colombia trade agreements. After defeating them, Congress must create a better way to promote global trade."

Read the entire piece here.

 

Detnews_logo

Open borders, trade deals are ruinous for America

By James P. Hoffa, president of the International Brotherhood of Teamsters

"Three more job-killing trade deals are in the hopper, and you can bet the news media will swallow whole the phony claims made about them by the U.S. Chamber of Commerce and other groups. Congress is now considering trade agreements with Colombia, where trade unionists are routinely murdered; Panama, a well-known tax haven; and South Korea, in the biggest trade deal since NAFTA. It seems our trade policy is of the corporation, by the corporation and for the corporation."

Read the entire piece here.

 

Boston_globe

Trade deals are no deal for US

By Steven J. D'Amico, former Mass. state Representative and member of the American Jobs Alliance

"Even after losing 682,000 jobs to NAFTA since it took effect in 1994, and 2.4 million to China since it joined the World Trade Organization, Washington continues in its blind faith that somehow these trade deals are good for us. This summer Congress is expected to take up three new trade deals - with Korea, Panama, and Colombia. These trade pacts are bad for American workers, bad for our domestic economy, and bad for democracy."

Read the entire piece here.

 

Columbus Dispatch 
Free-trade deals would be costly to U.S.

By Tom Burga, president of the Ohio AFL-CIO

"For over a decade, the labor movement and development advocates have called for fair-trade policy that is part of a more coordinated and coherent national economic strategy.  Unfortunately, the Korean, Colombian and Panamanian free-trade deals before Congress do not address the fundamental policy failures of the North American Free Trade Agreement and China's inclusion into "favored nation status," which has led to catastrophic job loss in the U.S. and the explosion of our import/export deficit, now reaching $500 billion annually."

Read the entire piece here.

 

Redding Record Searchlight Trade pacts bad for California agriculture

By Curtis W. Ellis, executive director of the American Jobs Alliance, and Joaquin Contente, president of California Farmers Union 

"Pending free trade agreements with Korea, Colombia and Panama are bad for California farmers and must be rejected if we are to preserve our way of life. All three trade treaties are based on North American Free Trade Agreement-style policies that have displaced American farmers while sending jobs that support California's rural communities offshore. In fact our leading export is jobs and we reward companies that outsource jobs. Since NAFTA took effect, the United States has lost 300,000 farms and millions of jobs."

Read the entire piece here.

 

WisStateJrnl 
Wisconsin Farmers Union opposes free trade pact with Korea

By Darin Von Rudin, president of Wisconsin Farmers Union

"WFU strongly opposes the Korea-U.S. Free Trade Agreement and urges Congress to do the same. We feel our legislative leaders should be protecting and promoting American jobs, family farms and our rural communities through sound economic, environmental and labor policies. We don’t think this trade agreement adequately promotes these values."

Read the entire piece here.

 

Statesman_Journal_logo 
Rep. Schrader is confused on international trade

By Steve Hughes, state director of the Oregon Working Families Party,Ray Kenny, International Brotherhood of Electrical Workers Local, and Frank Rouse, president of the Machinists Union Local 1005

"Congressman Kurt Schrader seems to be confused. On the one hand, he says he opposes trade deals that extend greater rights to foreign investors than exist for Oregonians doing business in our state. On the other hand, he is supporting a massive new free trade agreement with South Korea that does just that."

Read the entire piece here.

 

Minneapolis Star-Tribune logo 
Free trade agreements jolt the economy, but not in a good way

By Jessica Lettween, director of the Minnesota Fair Trade Coalition

"It's easy to understand why multinationals adore the Korea agreement. But with around 7 percent unemployment in Minnesota, a budget crisis, and an electorate that is strongly opposed to more NAFTA-style trade agreements, it is baffling why any member of Congress would endorse a deal that will cost us so much."

Read the entire piece here.

 

The Hill masthead

Choose voters over donors on free trade

By Gordon Lafer, professor at the University of Oregon, former senior adviser to the U.S. House’s Labor Committee

"Like Republicans, the White House is eager to get these treaties done quickly, so that voters will have forgotten by the fall of 2012. To see the Obama administration and Republican leadership quietly collaborating to seal this deal in knowing violation of the voters’ will is among the most telling signs of corporate power in Washington, and among the most depressing stories in these tough times."

Read the entire piece here.

 

Winona Daily News

Obama's trade policy clearly shortsighted

By Karen Hansen-Kuhn, international program director for the Institute for Agriculture and Trade Policy

"More than two years into the Obama administration, we're still waiting for a 21st-century trade policy."

Read the entire piece here.

 

(Disclosure: Public Citizen has no preference among the candidates for public office.)

 

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White House Rocked by Protests Against Unfair Colombia Trade Deal

Colombia FTA Protest July 11 2011 WH Coffins Signs

Today, hundreds of activists gathered at the White House for a demonstration against the U.S.-Colombia FTA. These representatives of faith, labor, human rights and consumer organizations called for the Obama administration to drop its push to pass the Bush-signed trade pact. Fifty one coffins were laid in front of the White House to symbolize the murders of that number of Colombian unionists last year. Five activists were arrested as an act of civil disobedience, including Rick Chase, Executive Director of the Presbyterian Peace Fellowship.

Click here for more pictures.

Read the press advisory after the break.

Continue reading "White House Rocked by Protests Against Unfair Colombia Trade Deal" »

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Chamber of Commerce's Misleading Data Website Gives Only Half the Story

Today the Chamber of Commerce launched a website that purports to show the effects of U.S. trade upon jobs in each congressional district, as part of its lobbying campaign to pass the Korea, Colombia, and Panama Free Trade Agreements (FTAs).  Even a cursory review shows that the data included to represent “effects of trade” is only gross exports – imports are excluded, as are net figures that show the actual impact of trade on the districts. 

Indeed, the Chamber’s “new” website just repackages the previously-released old exports-only data featured in past Chamber “studies” of the FTAs. It’s the same misleading approach - like only counting deposits into ones bank account, not also withdrawals or the ending balance.

And, this is especially deceptive because it operates to cover up the huge U.S. trade deficit, which has been driven to astronomical levels by the very same NAFTA-style trade pacts supported by the Chamber of Commerce and the American jobs lost from years of large annual trade deficits.

When economists study the jobs impact of  trade pacts, they consider both sides of the ledger by estimating the number of jobs supported by exports as well as the number of jobs displaced by imports. As Nobelist Paul Krugman noted: " If you want a trade policy that helps employment, it has to be a policy that induces other countries to run bigger deficits or smaller surpluses. A countervailing duty on Chinese exports would be job-creating; a deal with South Korea, not…"

Studies that review both imports and exports explain why broad majorities of Americans are against the types of trade pacts the Chamber continues to promote. For instance, the Economic Policy Institute found that 5.6 million more jobs were displaced by imports than were supported by exports in 2007. Looking into the future, the Economic Policy Institute has estimated that implementation of the Korea and Colombia FTAs alone will lead to a net loss of 214,000 U.S. jobs due to rising trade deficits.

Exports support jobs, but the NAFTA-style trade pacts touted by the Chamber will lead to greater imports than exports, displacing workers in the United States. Says who? Well, among others, the Korea FTA’s lead negotiator Ambassador Karan Bhatia who was Pesident George W. Bush’s deputy U.S. trade representative. In an October 2006 speech to a Korean audience, Bhatia said that it was a “myth” that “the U.S. will get the bulk of the benefits of the FTA.” He went on to say, “If history is any judge, it may well not turn out to be true that the U.S. will get the bulk of the benefits, if measured by increased exports.” He added that, in the instance of Mexico and other countries, “the history of our FTAs is that bilateral trade surpluses of our trading partners go up,” meaning that the U.S. trade deficit with those countries increased. 

Even on its own terms, the Chamber website’s estimates of the number of jobs supported by exports in each congressional district are often double counted and misleading. According to the website’s own methodological summary, if any part of a county intersects with a congressional district, all of that county's exports and extrapolated “jobs-supported” are added to that  district's total. This leads to a huge degree of double-counting, since exports from a single county are often assigned to multiple congressional districts. In Texas alone, the sum of the number of jobs supported by exports in each congressional district is 250 percent greater than the state total given by the Chamber, meaning that the jobs estimate for the average Texas congressional district is inflated by 250 percent. Thus, users of the website are misled when they think they are accessing the number of jobs supported by exports in their congressional districts.

Public Citizen has estimated the number of jobs in each congressional district in sectors that will be hit particularly hard by the Korea FTA. A searchable database of these estimates is available at:
http://www.citizen.org/korea_fta_jobs_at_risk

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FTA Investors Rules Not Fixed by Preamble Change from 2007

As EOT regulars know, NAFTA-style trade deals contain investment rules that allow corporations to bypass national legal systems and launch attacks on governments in international tribunals. The basis for these attacks can be as simple as institution of a new environmental policy that affects the corporation’s expected future profits. Judges for these so-called “investor-state” cases are selected in part by the corporation, and the trade-pact rules are tailored to corporate demands. Often the mere threat of one of these investor-state awards can cast a chill on public-interest regulation.  All told, more than $350 million has been paid to date in these cases.  Moreover, there are over $9.1 billion in claims in the 13 investor-state cases outstanding under NAFTA-style deals, relating to environmental, public health, and transportation policy.  An additional $483 million has been awarded under U.S. Bilateral Investment Treaties (BITs), which contain similar investment rules. Billions of dollars are also pending in BIT cases now underway.

The Panama, Colombia and Korea “free trade agreements” (FTA) may be considered by Congress in the near future. These pacts constain investment rules that are almost identical to those in NAFTA, except where they are worse. There was one investment-related addition made to the preambles of these FTAs as part of a May 10, 2007 deal with the Bush administration. It stated that the parties: “AGREE that foreign investors are not hereby accorded greater substantive rights with respect to investment protections than domestic investors under domestic law where, as in the United States, protections of investor rights under domestic law equal or exceed those set forth in this Agreement.…”

Some have suggested that this provision goes all or most of the way towards resolving the concerns with these provisions. This is not the case. There is no certainty as to the legal meaning of the May 2007 preambular provision.

Public Citizen has just published a memo that examines six different approaches to preambular language, including the four that have been taken by the tribunals under the 45 final awards issued under U.S. FTAs and BITs.

The memo finds the May 2007 preambular modification fails to address the main concerns raised by scholars and members of Congress with regard to the investment provisions. Indeed, there is scant historical support for the notion that pro-public interest provisions of preambles are protective of regulatory prerogatives: nearly 90 percent of the time, tribunals have given them no weight at all. The remainder of the time,tribunals found that pro-public interest provisions had to be balanced against, and possibly watered down by, pro-investor provisions.

Deeper changes will be required to the investment provisions of the proposed FTAs with Korea, Panama and Colombia, as well as a Trans-Pacific FTA (which includes Peru, the U.S. and eight other countries) now under negotiation. 

To read the memo, go here.

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Trade Looms Large in NY Special Election

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

Yesterday Democrat Kathy Hochul pulled off an upset win against Republican Jane Corwin in the special election for New York's 26th District, wresting control of a seat the GOP has occupied since the 1960's. Much attention has focused on the candidates' positions on Medicare as a deciding factor in the race, but trade policy also played a key role in the election.

Jack Davis, independent candidate and president of a local manufacturing company, turned the spotlight on the devastating consequences of unfair trade policies for American manufacturing workers. His focus on offshoring garnered nine percent of the votes in the special election.

Earlier in the race, Davis was polling at 23 percent, a testament to the power of trade as an election issue.  Eager to be on the right side of the trade issue, Kathy Hochul released a strongly-worded statement condemning NAFTA and opposing the Korea, Panama, and Colombia FTAs.

For her part, Corwin ran an ad claiming that she would "oppose trade agreements that just aren’t fair", but never followed through in naming a specific pact that she would oppose. When asked point-blank in a questionnaire if she supported NAFTA and the Korea, Panama, and Colombia FTAs, she refused to take a position.  The tension between Corwin's vague fair trade statements and her reluctance to oppose specific policies came to a head when Hochul and Corwin addressed Davis' absence from the May 12th debate:


Oddly, Hochul and Corwin both ended up noting Davis’ absence from the debate not to needle him, but each other.

Hochul started it, saying she wished Davis had participated because “he brings a lot to the debate,” and on his behalf demanded Corwin state her view of the North American Free Trade Agreement and unfair trade. That’s been Davis’ signature issue in all four of his congressional campaigns.

Corwin’s answer: “Right back at’cha, Kathy. There are a lot of things that Jack could ask Kathy Hochul. I think we need to get clarification on her plan for Medicare. She talks about holding the line on taxes. How do you hold the line on taxes when you’re advocating ... to raise taxes?”


That exchange sharply contrasted the difference between Hochul's commitment to oppose specific trade agreements and Corwin's broad statements on fair trade. A large number of the new GOP House freshmen campaigned on supporting fair trade. With Hochul's solid win over Corwin, they're on notice that they will have to put their money where their mouths are on the upcoming votes on the Korea, Panama, and Colombia FTAs or face voter anger in November 2012.

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Trade Deficit with FTA Countries Continues to Climb

Yesterday the Census Bureau released the March trade flow numbers, revealing that our trade deficit continues to worsen. The U.S. trade deficit rose by $2.8 billion, or 6.2 percent, between February and March on a seasonally-adjusted basis.

With Congress on the verge of considering another set of trade agreements based on the NAFTA model, digging into the data of this new release could help illustrate whether existing NAFTA-style trade agreements are aiding or hindering the fight to keep the trade deficit under control.

The most recent trade data shows that the deficit with our 17 FTA partners continues to worsen, adding to the body of evidence that NAFTA-style trade agreements are hurting American workers. Between February and March, the U.S. trade deficit with U.S. FTA partners grew by $1.6 billion, or 12.3 percent. News reports on the trade deficit noted that the dramatic rise in the price of oil in March accounted for much of the widening of the overall trade deficit. Do oil imports explain the rise in the trade deficit with our FTA partners? No, the jump in the trade deficit with U.S. FTA partners is still huge when you take out oil to account for the jump oil prices. With oil excluded, the trade deficit with FTA partners increased by $846.9 million, or 13.9 percent, between February and March. The non-oil trade deficit with countries that are not FTA partners grew by only 6.8 percent over February-March, less than half the pace of the growth in the deficit with FTA partners.

The latest trade numbers are a sign that the trade deficit is acting as a brake on the momentum of the economic recovery. Given that trade with our current FTA partners act as a primary force in that brake, it is time for the Obama administration to rethink the Korea, Panama, and Colombia FTAs and chart a path away from the old trade model that leads to skyrocketing deficits.

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New Estimate of NAFTA Jobs Impact Warns Against Korea FTA

Rob Scott at the Economic Policy Institute has released a new study estimating 683,900 U.S. jobs have been displaced due to the rise in the trade deficit with Mexico after NAFTA was enacted. It serves as a grim warning of what could come if Congress were to approve the Korea FTA, which is based on the NAFTA model. Scott breaks down the job displacement by industry and congressional district, illustrating how workers across the country have been harmed as the deficit with Mexico skyrockets.

As Scott notes, corporate lobbyists and administration officials pushing the Korea FTA today sound just like pro-NAFTA government officials back in the early 1990's before NAFTA devastated U.S. manufacturing jobs. Once again they are claiming that a NAFTA-style trade agreement will create thousands of jobs, but this new study is a wakeup call to anyone who views their claims as believable.

Scott highlights the fact that the industrial structure of U.S. trade with Mexico and South Korea are very similar, which portends NAFTA-like job loss if the Korea FTA were to be implemented. The U.S. has huge trade deficits in electronics and motor vehicles and parts with both Mexico and South Korea, and the U.S. International Trade Commission predicts that the U.S. trade deficit in these products will dramatically increase if the Korea FTA were to enter into force.

Daniel Griswold over at the Cato Institute challenged the results of the study, claiming that the study's method of computing job losses is flawed. Proponents of unfair trade may rail against the methodology that Scott employs now, but what did they think of it when they were trying to prove that NAFTA would be a boon for workers before it passed? They embraced it. Gary Hufbauer and Jeffrey Schott, leading NAFTA proponents at the Institute for International Economics, released a study in 1993 predicting that the annual U.S. trade balance with Mexico would improve by $9 billion due to NAFTA, leading to a net increase of 171,000 U.S. jobs. To estimate the increase in the number of jobs, they used same method as Rob Scott used in his latest NAFTA study and applied it to their prediction of the change in trade flows after NAFTA, although their study did not break down jobs geographically.* Perhaps FTA proponents have changed their minds about the method merely because it now reveals all those claims about NAFTA job gains went up in smoke after NAFTA was actually enacted.

Griswold then goes on to belittle the magnitude of the job displacement estimated by the study, comparing it to the 15 million jobs that are created and destroyed annually. It's a silly comparison, because the 15 million figure deals with turnover, whereas Scott's study deals with the changes in the total number of jobs displaced by trade with Mexico at two different points in time, i.e. the net change after all the turnover has completed. 683,900 jobs is a lot of jobs, especially to those workers who have seen their jobs offshored due to unfair trade policy.

*The only significant difference between the studies is that Hufbauer and Schott used estimates from a 1992 Department of Commerce study of the number of jobs supported in each industry by each export commodity to Mexico, for which there is no similar recent data. Scott used data from the Bureau of Labor Statistics on the jobs supported by a given quantity of goods produced in the United States by industry, which gives results similar to the Department of Commerce data.

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Todd Tucker in Foreign Policy magazine: "Obama has swapped smart policy for the same-old job-crushing trade deals."

Check out Todd Tucker's piece in Foreign Policy magazine.

 

ForeignPolicyLogo1 

A Bad Trade

Obama has swapped smart policy for the same-old job-crushing trade deals.

"When Barack Obama was elected back in 2008, he committed to breaking with the same flawed trade policy the United States has followed for a generation. Obama promised a new page, one that focused on creating American jobs and protecting the environment. Instead, his administration has flip-flopped on these campaign promises and is now pushing free trade agreements (FTAs) that are projected to cost American jobs, undermine U.S. negotiating credibility, and could even dampen the president's electoral prospects in 2012. ..."

Read the entire piece here.

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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.

Continue reading "USDA's FTA Report Repeats Errors of Previous Flawed Studies" »

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HI State Rep Takumi Says No More NAFTAs!

Check out this op-ed written by Hawaii State Rep. Roy Takumi (D-Pearl City, Palisades) in theTakumi Honolulu Star Advertiser today. Takumi, who has served in the Hawaii State Legislature for over 19 years, is leery of more NAFTA-style agreements.

I began serving in the state House 19 years ago, shortly before NAFTA was implemented. Since NAFTA and a batch of NAFTA-style deals with other countries, we've suffered an exploding trade deficit, the loss of more than five million manufacturing jobs, and stagnation of real median wages for American workers  at 1970s levels. Meanwhile, we have been flooded with unsafe imported food and goods, and foreign investors have used NAFTA to challenge important state environmental laws before foreign tribunals.

Further, Takumi takes on some of the rosy promises Korea FTA supporters are making to Hawaii's agricultural producers.

The reality is that even with zero Korean tariffs, most of Hawaii's agricultural products cannot come close to the low prices for which these products are sold to Korea by others. For example, Indian banana and papaya farmers sell their crop at one-fourth to one-third the price local farmers require. Peruvian farmers sell guava at $173 per metric ton; our price is $346. Farmers in Thailand, the largest pineapple producer, sell their pineapples at $120 per metric ton compared to $458 locally. How do we compete in this market?

Takumi, who has led efforts to improve trade agreements for several years - including sponsoring legislation that was enacted in 2007 to give the Hawaii legislature a formal role in determining some of Hawaii's commitments to trade agreements - is among many state officials who are critical of the undemocratic NAFTA-style model.

Just a few weeks ago, New Jersey State Senator Shirley Turner (D-Trenton) introduced a resolution supporting a New Jersey Constitutional amendment requiring that the New Jersey legislature give approval before New Jersey may be committed to certain aspects of international trade agreements. This resolution comes on the heels legislation passed by wide margins in the New Jersey legislature last session which was vetoed by the outgoing governor, John Corzine. If Turner's resolution passes, the proposed amendment will go to the ballot this fall.

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The Korea FTA: Putting Corporations Before the Public Interest

We’re continuing our series of facts in response to the Korean Embassy’s misleading claims on the Korea Free Trade Agreement (FTA). Our full response can be viewed here. This time, the focus is on the Korea FTA’s investor-state dispute resolution mechanism that threatens public interest laws.

Lori Wallach’s Huffington Post piece: The Korea FTA’s investor-state dispute resolution mechanism “empowers foreign investors to skirt domestic courts and seek cash compensation for regulatory costs before foreign tribunals…”

Korean Embassy’s claim: “The investor-state dispute resolution mechanism in the KORUS FTA is a common feature of free trade agreements and bilateral investment treaties, of which there are more than 3,000 worldwide. NAFTA has an identical investor-state dispute resolution chapter. Since it took effect in 1994, Mexican and Canadian companies have filed 18 requests for arbitration against the U.S. government. They have won none of them.” Elsewhere, the Embassy adds that, “Some opponents of the FTA have alleged that this section will provide Korean companies with rights greater than those afforded to U.S. companies. Not only is that not true, it is directly rebutted in the text of the agreement which says, ‘foreign investors are not hereby accorded greater substantive rights with respect to investment protections than domestic investors under domestic law where, as in the United States, protections of investor rights under domestic law equal or exceed those set forth in this Agreement.’”[i]

Facts: Opposition to the investor-state system is at an all time high, in part because of such callous attitudes from governments. In July of last year, 110 members of Congress sent a letter to President Obama opposing the investor-state mechanism in the Korea FTA, among other provisions.[ii] A bipartisan group of 146 legislators (including the majority of House Democrats) cosponsored the TRADE Act, which called for elimination of the investor-state system. And in September 2010, over 550 faith, family farm, environmental, labor, and consumer protection organizations signed a letter to President Obama urging that he remove the investor-state mechanism from the Korea FTA.[iii]

The Embassy would like to portray the investor-state dispute settlement mechanism as mundane and uncontroversial. Nothing could be farther from the truth. In October 2010, Korean legislators and members of the U.S. Congress sent a joint letter to President Obama and President Lee that called on them to change the text of the FTA to eliminate the threat of investor-state lawsuits.[iv] The recent joint statement of Korean lawmakers, labor unions, farmers and civil society groups highlighted in Lori Wallach’s Huffington Post piece reiterates the deep concern of Koreans that the investor-state mechanism would allow multinational corporations “to bring our government to the foreign arbitration tribunals to demand compensation over public policy standards, even those that apply to domestic and foreign corporations alike.”[v]

Language cited by Embassy is non-binding. To counter the fact that the FTA’s clear language in Chapter 10 does provide Korea firms operating here better rights than domestic firms, the Embassy quotes a provision of the FTA (e.g. “foreign investors are not hereby…) that is in the preamble of the agreement and thus non-binding. The non-binding nature of the preamble was noted most recently by the U.S. State Department in the Grand Rivers et. al. vs. United States investor-state arbitration under NAFTA, which stated: “the key to interpreting the provisions of the NAFTA must be the text itself, as informed by the treaty’s context, object, and purpose, only to the extent those additional sources are relevant to, and consonant with, the substantive provision at issue. This approach is grounded in the well-accepted principle that general objectives can shed light on treaty provisions, but cannot impose independent obligations on treaty signatories.”[vi]

Continue reading "The Korea FTA: Putting Corporations Before the Public Interest" »

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Gingrich lauds loss of jobs to Mexico

As Alex Seitz-Wald at Think Progress reports, possible Republican presidential candidate Newt Gingrich is saying NAFTA worked because it created jobs in Mexico. On a call in show, Gingrich said:

    CALLER: Back in the ’90s I remember Ross Perot saying that there was going to be the giant sucking sound of jobs if NAFTA passed. I think it ended up being true, right? And I know you were a big free trader.

    GINGRICH: Yeah, well, I don’t think it was true in Mexico. I think the fact is that NAFTA allowed us to build jobs in Canada, the United States, and Mexico, in competition with China. I mean, our big competitor is not Mexico. Our big competitor is China and India. And I’d rather have jobs close to the United States than have jobs overseas in places like China and India. That’s why I was in favor of it. … So in a sense, I’d like our neighborhood to be fairly well off and fairly prosperous.

I doubt too many fair trade Tea Party folk will rally behind a guy who shows so little concerns for "Making it in America."

Moreover, as EOT readers know, it's false that NAFTA has somehow benefited Mexico at the expense of the United States: it has been lose-lose for working people in both nations.

Today's revelation that the Pentagon is flying drones over Mexico to track down narcotraffickers is just the latest revelation that NAFTA prioritized the corporate bottomline at the expense of sustainable, non-drug related job creation.

(Disclosure: Public Citizen has no preference among the candidates for public office.)

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Domestic courts must defer to NAFTA courts?

Yesterday, I wrote that there were some additional aspects of the Cargill v. Mexico award under NAFTA that were notable that I hadn't covered in my original post last week.

Another dimension of the Cargill v. Mexico arbitration worth mentioning is that Mexico lauched a case in Canadian courts to have the NAFTA award set aside, on the grounds that the ICSID panel erred and exceeded its jurisdiction. Mexico argued that it should only have to compensate Cargill for the damages it suffered in Mexico proper, not for the loss of revenue to the U.S. parent company as a result of not being able to export HFCS to Mexico.

The Ontario court refused to set aside or reduce the damages, and stated that national courts must show a high degree of deference to NAFTA investor-state awards. There were several quotes from U.S. and Canadian courts related to international arbitration that I had not seen before, but which were surprisingly blunt.  See this quote from Supreme Court Justice Blackmun from the Mitsubishi v. Chrysler case:

"As international trade has expanded in recent decades, so too has the use of international arbitration to resolve disputes arising in the course of that trade. The controversies that international arbitral institutions are called upon to resolve have increased in diversity as well as in complexity. Yet the potential of these tribunals for efficient disposition of legal disagreements arising from commercial relations has not yet been tested. If they are to take a central place in the international legal order, national courts will need to 'shake off the old judicial hostility to arbitration.'... and also their customary and understandable unwillingness to cede jurisdiction of a claim arising under domestic law to a foreign or transnational tribunal. To this extent at least, it will be necessary for national courts to subordinate domestic notions of arbitrability to the international policy favoring commercial arbitration..."

The Ontario court also favorably cited an argument from the Mexico v. Feldman Karpa case under NAFTA that  "the dispute settlement mechanism and the need for expertise, all combine to indicate that the statutory purpose is to take resolution of these disputes out of the hands of domestic courts..." (This argument was made by counsel for Feldman in Mexico's request to have the NAFTA arbitration set aside in Ontario courts in 2005.)

The Blackmun quote has been primarily invoked in U.S. courts with reference to private commercial arbitration, not investor-state cases that relate to public law. However, that has changed in the last year. On March 16, 2010, the U.S. District Court Southern District of New York wrote inthe Ecuador v. Chevron case that,

Chevron and Texaco (hereinafter referred to as “Chevron”), have commenced an arbitration proceeding before a tribunal pursuant to the Bilateral  Investment  Treaty  between the United States and Ecuador...

Numerous cases have held that there is a strong presumption in favor of arbitration. See, e.g., Smith/Enron Cogeneration Ltd. P'ship, Inc. v. Smith Cogenerational Int'l, Inc., 198 F.3d 88, 92 (2d Cir.1999). We believe that this is particularly true where the arbitration is pursuant to an international treaty, here a treaty between Ecuador and the United States. See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985) (Federal policy favoring arbitration “applies with special force in the field of international commerce.”). The explicitly stated purposes of the treaty were to encourage investment by Americans in Ecuador and Ecuadorians in the United States by assuring investors that an independent, neutral tribunal exists to arbitrate claims such as the claim here that Ecuador is seeking to impose liability unlawfully. See Treaty Between The United States of America and The Republic of Ecuador Concerning the Encouragement and Reciprocal Protection of Investment, U.S.-Ecuador, Aug. 27, 1993, S. Treaty Doc. No. 103-15. It is Chevron's claim that this is what Ecuador is now in the process of doing. Thus, a motion to stay here strikes at the core purposes of the treaty between Ecuador and the United States...

Ecuador's motion for summary judgment and motion for a preliminary injunction are denied. The Yaiguaje Plaintiffs' motion for summary judgment is denied. Chevron's motions to dismiss Ecuador's petition and the Yaiguaje Plaintiffs' petition are granted.

Finally, the same court made a virtually identical conclusion citing the Blackmun language on Jan. 21, 2011, in Argentina's application to vacate an arbitral award under the UK-Argentina BIT. Argentina made the argument that U.S. courts should not side with the British investor BG Group PLC because...

Argentina argues that the arbitral panel should have appraised the value of BG Group's investment on “the day before the [emergency] measures” were taken, Tr. 17:7, Sept. 28, 2010, when the Argentine economy had already collapsed, Pet'r's 3d Supp. Mem. at 18, instead of assessing “the value of BG [Group's] stake in MetroGAS in 1998 .... when the Argentine economy was at its peak,” id. at 18, by relying on the July 12, 1998 transaction involving the sale of Gas Argentino, S.A. shares, Award ¶ 441. Argentina asserts that the arbitral panel's valuation of BG Group's investment resulted in Argentina being “held responsible ... for the effects of the economic crisis it suffered between 1998 and 2001,” and thus the arbitral panel's ruling conflicts with both the principle that “[a]ctual pecuniary loss sustained as a direct result of the wrong is the measure to be applied in fixing damages,” Pet'r's 3d Supp. at 22 (citing Ainger v. Michigan General Corp., 476 F.Supp. 1209, 1233 (S.D.N.Y.1979)),15 as well as the Fifth Amendment's guarantee of entitlement to only “just compensation” for the taking of property, see Tr. 15:21-25, Sept, 28, 2010 (asserting that “the guiding principle of just compensation and the [T]akings [C]lause of the Fifth Amendment is that the owner of the condemned property must be made whole[,] but is entitled to no more”). These arguments are without merit...

To the extent Argentina is asserting that the arbitral panel's issuance of the Award itself violates the Takings Clause and contravenes the public policy of the United States, that position is also without merit. Of course, the arbitral panel is not an arm of any government, and thus any decision rendered by it could not constitute a “government taking.” But even assuming that the arbitral panel, as a quasi-judicial body, see, e.g., Portland Gen. Elec. Co. v. U.S. Bank Trust Nat'l Assoc., 218 F.3d 1085, 1090 (9th Cir.2000) (observing that an “arbitrator plays a quasi-judicial role” in conducting an arbitration), could be viewed as a governmental entity, the Supreme Court noted in Stop the Beach Renourishment, Inc. v. Florida Dep't of Environmental Protection, ---U.S. ----, ----, 130 S.Ct. 2592, 2604, 177 L.Ed.2d 184 (2010), that no clear standard exists for what constitutes a “judicial taking, or indeed whether such a thing as a judicial taking even exists.” It cannot be said, therefore, that the arbitral panel's issuance of the Award was an act that “violate[d] some explicit public policy that is well defined and dominant.” Banco de Seguros Del Estado, 344 F.3d at 264 (quoting United Paperworkers Int'l Union, 484 U.S. at 43) (emphasis added). Accordingly, if Argentina's position is that the issuance of the Award itself offends the Takings Clause and precludes confirmation of the Award, that argument also fails.

This ruling comes pretty close to examining the compatibility of international investment law obligations with U.S. constitutional norms. My blood started racing a bit as I read this. But the court veered away from anything very conclusive because of the muddled way in which Argentina raised the takings defense.

Folks waiting for a serious U.S. judicial look at whether and how well FTA/BIT indirect expropriation obligations match up with regulatory takings clauses must wait for another day.

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Wanna maximize NAFTA Claims? Create as few jobs as possible.

In my long post on the Cargill v. Mexico investor-state claim under NAFTA that was published last week, there were a couple of dimensions that I did not delve into, but which merit mention.

First, Cargill was able to get a much bigger damages award ($77.3 million) than its competitors Archer Daniels Midland (ADM, $33.5 million) or Corn Products International (CPI, $58.38 million).

There are a lot of similarities between the three. All three are U.S.-registered firms that sell high fructose corn syrup (HFCS) in the Mexican market. All three brought NAFTA claims against the same Mexican policy - the special excise tax on soda drinks that contain HFCS.

The main difference was that ADM and CPI actually went to the trouble to build HFCS facilities in Mexico, thus creating jobs in Mexico. Cargill thought about creating a facility in Mexico, but instead decided to process the HFCS in the United States and ship it to Mexico, thus creating only distribution-related jobs in Mexico, but not substantial manufacturing jobs.

Why does this matter? Well, the much reviled Mexican soda tax was motivated by Mexico's desperate attempts to salvage jobs as the country's rural sector got hammered post-NAFTA. CPI and ADM, who helped moderate the job destruction (by a tiny bit), were not able to claim as much in damages as Cargill, who moderated the job loss even less. Simon Lester over at IELP quotes the relevant reasoning, which relates to whether so-called "up-stream losses" should be counted among the damages in a NAFTA investor-state case.

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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.

Continue reading "Cola Wars Beat Drug Wars" »

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

The State Department published the NAFTA award in Grand River Enterprises Six Nations, Ltd. et. al. v. United States of America last week, a month after it was dispatched privately to the parties. The case was brought against the United States by a Canadian tobacco corporation that sold tobacco on reservations in the U.S. and three Canadian members of the Haudenosaunee indigenous group who owned or did business with the corporation. The claimants argued that implementation of the deal that U.S. states made with tobacco companies in the 1990s and later to address underage smoking and public health concerns about tobacco violated their NAFTA rights. The award, and other associated documents, is available here: http://www.state.gov/s/l/c11935.htm

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

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

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

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

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Bombshell Australian Report Finds FTAs "Oversold"

Productivity commission image for blog Yesterday, the Australian Government's Productivity Commission released a 400-page report examining the effects of Australia's "Free Trade" Agreements (FTAs). The Productivity Commission is the Australian Government’s independent research and advisory body on economic and social issues. The Age reports:

The Productivity Commission has told the government there is little evidence to suggest Australia's six free-trade agreements have produced ''substantial commercial benefits''....

Copyright provisions inserted in the US-Australia Free Trade Agreement could eventually cost Australia as much as $88 million per year....

The report also rails against investor-state lawsuit provisions like NAFTA's Chapter 11 that allow foreign corporations to sue sovereign governments for taxpayer compensation when governments take necessary action to protect the health and safety of their citizens: "There does not appear to be an underlying economic problem that necessitates the inclusion of ISDS [Investor-State Dispute Settlement] provisions within agreements.....Experience in other countries demonstrates that there are considerable policy and financial risks arising from ISDS provisions." The report goes on to note that millions of dollars of taxpayer funds has been paid out to multinational corporations due to corporate lawsuits filed under NAFTA's investor-state dispute settlement provisions. 

The report recommends that the Australian government "seek to avoid the inclusion of investor-state dispute settlement provisions in [FTAs] that grant foreign investors in Australia substantive or procedural rights greater than those enjoyed by Australian investors."  Australia excluded investor-state lawsuit provisions from the U.S.-Australia FTA due to justified fears that foreign corporations would demand compensation if environmental or public interest laws reduced their "expected profits."  The Australian trade negotiators would be wise to heed the well-reasoned recommendations of the Productivity Commission and ensure that investor-state lawsuit provisions are excluded from the proposed Trans-Pacific Partnership.
 
The report notes that the totality of evidence on FTAs "suggest that the economic value of Australia’s [FTAs] has been oversold." That sounds familiar. Oh, that's right, Public Citizen found that the same was true for U.S. FTAs in our September report, "Lies, Damn Lies, and Export Statistics: How Corporate Lobbyists Distort the Record of Flawed Trade Deals," in which we revealed that U.S. exports to FTA partners have grown at half the pace of U.S. exports to the rest of the world. There seems to be a consensus developing here.

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New Poll Shows GOP Voters Oppose NAFTA-Style FTAs

A new Pew poll released today found that antipathy towards “free trade” agreements and the WTO is particularly intense among Republicans and Tea Party supporters. This finding reinforces the results of previous polls that popular concern for the direction of our trade policy is spreading far beyond just Democrats.

Republicans in the survey were more almost twice as likely to believe that “free trade agreements” (FTAs) like NAFTA and the policies of the WTO harm rather than help the United States (by a 54 to 28 percent margin). This opposition is more intense than that of the public overall, more of whom still believe the U.S. is hurt by such unfair trade deals (by a 44 to 35 percent margin).

Republicans who agree with the Tea Party (think of those who had more enthusiasm to show up at the election booth last week) viewed FTAs even more unfavorably: 63 percent of them thought that FTAs and the WTO were bad for the United States, in contrast to only 24 percent who have a favorable view.

More independents also believe that these trade deals have hurt rather than helped the U.S.

If the Obama administration thought that it would be easy to pass a Korea FTA through a Republican Congress, these new poll numbers prove that it is mistaken. The Republican and Tea Party voters who elected the new Republican majority in the House are deeply opposed to more NAFTA-style FTAs, and the new members of Congress will find it dangerous to cast votes on FTAs against their constituencies. 

The poll also found that 55 percent of Americans think that FTAs have lead to job loss, while only 8 percent think that they have created jobs. This gap is even wider among Republicans and Independents. President Obama has said that his number one priority is job creation. If he is trying to convince Americans that he has his priorities straight, the last thing he should do is pass another NAFTA-style FTA, since most Americans believe that these FTAs are job killers. 

What Obama must do is follow through on his presidential campaign commitments and reform the Korea FTA, including deep changes to the labor rights, investor-state enforcement, and financial services regulation provisions of the FTA. If his administration thinks it can make some cosmetic changes and get it approved by Congress, it is in for a rude awakening.

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Nationwide, candidates attack jobs and tax dollars going overseas, but why?

Check out this AlterNet piece by Lori Wallach and Todd Tucker to find out.

AlterNet logo 
"This election season, hundreds of candidates across the country are campaigning on their opposition to jobs and tax dollars going overseas. This makes sense, given poll returns that show opposition to unfair trade practices is one of the few things that unite Americans of different incomes and political parties. But many of the politicians’ 30-second television ads do not explain why this offshoring is happening..."

Read the entire piece here.

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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.

Continue reading "Follow the Climate Reality Tour!" »

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Find Layoffs Caused by Outsourcing and Imports

The Trade Data Center that we launched last week contains so many data products that they can almost be lost in a blur. Right now I’d like to take some time to zoom in and profile the most exciting new data product – the overhauled Trade Adjustment Assistance (TAA) database. The TAA database, available here, tracks specific layoffs that have occurred due to rising imports or outsourcing, as certified by the Department of Labor.

Some readers may be familiar with the TAA database that Public Citizen has maintained for years.  Our new database is an overhauled version of this.  Whereas the previous database only gave the workplace location in the form of the city and state, you can search the new database by congressional district, county, and metropolitan area!  It also gives information about the foreign country implicated in many of the layoffs.

Plus, the new database consolidates the databases of the regular TAA program and the NAFTA-TAA program, which operated between 1994 and 2002, so we can be sure of exactly how many jobs were lost due to imports or outsourcing in a given locality.  Take a look at the FAQ on the database or the technical documentation for more information on these topics.

I’ll give a few examples of how to use the database.

Last month, the corporate members of the President’s Export Council released a letter advocating for the passage of the Bush-negotiated Korea, Panama, and Colombia Free Trade Agreements (FTAs), claiming that passage would boost exports. They ignored the fact that the growth of exports to FTA partners has lagged behind exports to other countries, as we showed in our recent report.  It is possible that these corporations are pushing for FTAs since it would facilitate the export of American jobs rather than American goods. We can investigate this with the help of the TAA database.

Let’s pick Xerox, one of the corporate members of the President’s Export Council. First, we enter “Xerox” into the “Company” search box.

TAA Xerox company

Uncheck the “Denied Petitions” box under the “Cause” option so that the search results include only layoffs that have been certified by the Department of Labor as occurring due to offshoring or rising imports.

TAA Xerox pet denied

Then click “Search”

TAA Xerox results

The first result is a Xerox copier factory in Webster, NY that laid off 450 workers when it outsourced work to Mexico in 2000.  In total, 1613 Xerox workers have been certified under the TAA program.  Does Xerox support FTAs because it thinks that it can export more products with FTAs or is it chomping at the bit to outsource more jobs, which the FTAs would facilitate?

You can query the database for all trade-impacted workplaces in a certain geographic area, such as congressional district. 

Simply select the state and input the desired district number – with a leading zero if it is a single digit – and it will pull up all the workplaces in that district. Make sure to uncheck the “Denied Petitions” checkbox if you only want the certified workplaces. Let’s pick Connecticut’s 5th district.

TAA CT-05 input

There are 79 certifications covering 6,021 laid off workers. Rep. Chris Murphy, who represents Connecticut’s 5th district, should carefully consider becoming a cosponsor of the TRADE Act since unfair trade has been so harmful to his constituents.

Finally, don’t forget to check out our Google map that displays the location of all of the TAA-certified workplaces and gives information about each. Double click a part of the map to zoom into your town and explore how unfair trade has impacted your community.

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Not enough canola to remove the bitter NAFTA taste

Seemingly from the annals of fake corporate names like Globochem and Brawndo, a company named Chemtura recently was ruled against in a NAFTA investor-state case brought against Canada.

Their claims? That Canada had failed to accord "fair and equitable treatment" to - and had indirectly expropriated - their investment. A panel convened under UNCITRAL sided against Chemtura.

But before we crack open the champagne...

  1. Chemtura's case was undermined by several revealing internal documents that may not be available in other cases, Part I. Chemtura (and its predecessor companies) are in the business of marketing pesticides to canola seed growers (among many other things). In the Canadian market, they had used lindane, a chemical thought to contribute to cancer and restricted in the U.S. and in many other countries around the world. Chemtura was also involved in marketing alternative chemicals to lindane in the U.S. market. In 1997, a Chemtura subsidiary got wind of lindane-treated canola seed coming into the U.S. from Canada, and contacted the U.S. EPA to put the smack down on the practice. The EPA did take some actions, which snowballed eventually into Canada reconsidering whether it shouldn't also ban or phase out lindane treatments, which in turn affected, you guessed it, Chemtura's Canadian lindane operations. It was difficult to challenge Canada's actions since they snowballed from a series of actions initiated by the company's own U.S. affiliate. (See page 28 of this.)
  2. Chemtura's case was undermined by several revealing internal documents that may not be available in other cases, Part II. In 1998, Chemtura had sent an internal communication that arguably revealed a kind of double speak: one the one hand, the company publicly agreed to voluntarily withdraw Lindane from the Canadian market. Privately, they were lobbying for expedited Canadian approval of a lindane alternative that they were using in the U.S.... perhaps as a quid pro quo. This internal communication weakened Chemtura's argument in the NAFTA case when the company tried to paint itself as a victim of regulators. (see page 53 of the decision - linked above and here.)
  3. Better to follow than to lead. I would also just note that Canada was, in this case, taking and facilitating a series of steps to move past lindane that a great many countries had already taken going back to 1968. Canada was a laggard in this regard, and it would have been difficult for the tribunal to side with an investor against a policy of such international pedigree. Countries that are innovators in the field of environmental protection would not have similar "cover."
  4. The tribunal embraced a troubling notion of customary international law. Historically, the notion of "customary international law" has been a pretty limited one, essentially designed to capture the standard behavior of governments. Under NAFTA and other pacts with investor-state dispute resolution, however, unelected tribunalists have expanded the notion of "customary international law" to include stuff that investor-state tribunalists (rather than governments themselves) say. While siding with Canada, the Chemtura tribunal embraced this troubling notion of customary international law (see page 31-32).
  5. Democracies get judged on how quickly they help out corporations relative to other democracies. While ultimately siding with Canada, the tribunal analyzed how quickly Canadian regulators approved company's pesticides relative to their U.S. counterparts to help determine whether Canada was violating Chemtura's NAFTA rights. (See page 67). While a minor part of the overall decision, this is a troubling precedent, and could incentivize corporations to launch investor-state cases when regulatory approvals occur less quickly than they would like.
  6. Many troubling aspects of NAFTA's expropriation doctrine affirmed. As my colleague Matt Porterfield has written, one of the most troubling aspects of NAFTA investor-state decisions is that, in variance with U.S. and most countries' domestic takings doctrine, NAFTA allows corporations to challenge as expropriations regulations that do not destroy/transfer nearly 100 percent of the value of an entire real property asset or interest. The Chemtura tribunal refused to endorse a break from past NAFTA tribunals, which have allowed an expansive definition of property interests, "conceptual severance" (i.e. a subpart of the property is treated as the whole for expropriation analysis), and less than 100 percent value diminution to constitute an expropriation. For instance, the Chemtura tribunal stated that "elements such as goodwill, customers or market share, or those covered under the more generic heading of the Claimant's "lindane business" in Canada, are part of the overall investment..." Such concepts would not typically be considered "property" under U.S. law for takings analysis. These "elements" could have been deemed to be expropriated, even if the rest of Chemtura's Canadian interests survived. And the fact that "net sales of lindane-based products represented approximately [only] 10 percent of" Chemtura's Canadian sales appeared to be the basis of the tribunal's conclusion that the government measure did not constitute a substantial enough deprivation to qualify as an expropriation... rather than how the matter would be analyzed under U.S. law, which has typically been to categorically reject any takings claim below the 95% destruction threshold. If lindane had constituted half of Chemtura's Canadian business, would the tribunal have made a different determination on this point? (pages 71-78)

The tribunal did make a very important statement, however:

"Irrespective of the existence of a contractual deprivation, the Tribunal consideres in any event that the measures challenged by the Claimant constituted a valid exercise of the Respondent's police powers. As discussed in detail in connection with Article 1105 of NAFTA, the PMRA took measures within its mandate, in a non-discriminatory manner, motivated by the increasing awareness of the dangers presented by lindane for human health and the environment. A measure adopted under such circumstances is a valid exercise of the State's police powers and, as a result, does not constitute an expropriation."

This a nice statement, although unfortunately it will not be a binding precedent on future investor-state tribunals, and Canada still had to shoulder half of its legal costs ($3 million Canadian). Policymakers should go a step further and state - in the trade pact text - that non-discriminatory policies that governments take for health and environmental protection cannot be interpreted as violating ANY trade pact terms.

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Lori Wallach on HuffPo: "Does the U.S. Trade Rep. Secretly Love Higher Tariffs?"

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

HuffPo logo 

Does the U.S. Trade Rep. Secretly Love Higher Tariffs?

"For a guy who loves 'free trade' and is supposed to represent U.S. workers and businesses, U.S. Trade Representative Ron Kirk seems way too comfy with tariffs being slapped on American exports. Instead of renegotiating a North American Free Trade Agreement (NAFTA) requirement that Mexico-domiciled tractor-trailers have full access to U.S. roads, Kirk is allowing a second year of sanctions against $2.5 billion in U.S. exports to Mexico..."

Read the entire piece at the Huffington Post.


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Introducing: Maps of Corporations to Gain New Rights to Sue Under Korea FTA

Korea maps image for blog We now have exclusive Google maps of the locations of corporations that would gain new rights to challenge public interest laws under the Korea FTA. Click here to explore the maps on our website or look below the jump to view them.

These maps show that the threat of corporate challenges of public interest laws under the Korea FTA is not just a theoretical possibility.  And, given that so many NAFTA investor-state cases have challenged local and state laws , the maps are a wonderful tool to explore which corporations could challenge laws in your community whether you're in the U.S. or Korea!

Check out our memo on the dangers of the investor-state enforcement provisions of the Korea FTA.  Also check out the list of firms that would gain new rights to sue the U.S. under the Korea FTA.

A broad coalition has sounded the alarm on these dangerous new corporate rights.  Among the members of the coalition are 110 members of the House of Representatives who sent a letter to President Obama on July 22, stating:

Implementing [the Korea FTA] without major changes to the text will…make the U.S. government vulnerable to compensation demands in foreign tribunals raised by Korean companies doing business within our borders.

AFL-CIO President Richard Trumka has added his voice to the chorus, saying:

Our negotiators should go back to the table to address the imbalanced market-access provisions in the agreement and to revisit the flawed investment, procurement, and services provisions as well.


Continue reading "Introducing: Maps of Corporations to Gain New Rights to Sue Under Korea FTA" »

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GTW's Todd Tucker on C-SPAN Today

Click here to watch Todd Tucker discuss NAFTA's legacy on C-SPAN's Washington Journal.

Todd on CSPAN 6.1.10

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Slick Willy's at it again!

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

On the heels of his trade policy renege, Bill Clinton has come back to Arkansas for some home cookin'.  He rather unfortunately defends Senator Blanche Lincoln's vote for NAFTA in this new campaign ad:

...But, this is yet another example of how trade is becoming a wedge issue this campaign season.

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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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Clinton Reversal on NAFTA Model?

Haiti collapsed house

While former President Clinton was visiting Haiti last week, he revealed that his views on trade policy have undergone some transformation since leaving office:    

At a news conference in Port-au-Prince Monday, Clinton said when he helped Haitian President Jean Bertrand Aristide return to power in 1994, Clinton also signed legislation that increased the flow of cheap American rice into Haiti.

But now, he says, "I think it was a mistake. I think it was part of a global trend that was wrong-headed."

Clinton says the theory behind that global trend was that wealthy countries could provide poorer countries with cheaper food than their farmers could grow.  That would lead poor countries to skip directly to industrialization. But Clinton says, once he left office and saw the effects of that policy on farmers in developing countries, he changed his mind.

"It is unrealistic to expect that a country can totally obliterate its capacity to feed itself and just skip a stage of development," he says. "It seems almost laughable now that we ever thought it."

It’s heartening to see one of the strongest proponents of the neoliberal economic model come to realize just how damaging that model has been. For Mexico, though, this realization has come about 16 years too late.

When NAFTA entered into force in 1994, cheap subsidized American corn from corporate farms flooded the Mexican economy, forcing hundreds of thousands of small corn farmers to leave their farms.  Many of these farmers, faced with corn prices below their cost of production, often had no choice but to emigrate to the U.S. to escape economic disaster.  During the 2007-2008 global food price crisis, poor Mexicans found out exactly how costly the destruction of the Mexican corn industry could be when tortilla prices, propelled by U.S. corn prices, skyrocketed by 60 percent within a few months.  

Now that Clinton has seen the flaws of the unfair trade model epitomized by NAFTA, could he press Obama to renegotiate NAFTA to make it fair for consumers, workers, and farmers in all three NAFTA countries?


(Thanks to Flickr user talkradionews for the photo)
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Is There an Outbreak of Amnesia at USTR?

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

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

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

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

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

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

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

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

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USTR’s 2010 Trade Policy Agenda: The Good, The Bad, and the Bizarre

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

Relative to last year’s March 1 report, the 2010 Trade Policy Agenda released today by the Office of the U.S. Trade Representative (USTR) excludes some troubling elements, such as the call for rapid action on the leftover Bush trade pact with Panama, the demand that climate policy conform to trade rules and the reference to renewed presidential trade authority. But at the same time, the report unfortunately fails to deliver the new fair trade agenda that President Barack Obama promised during the campaign and that is needed for our country’s economic recovery.

It also continues to mimic the misrepresentations that the Bush administration borrowed from the U.S. Chamber of Commerce with respect to only considering the role of exports on U.S job creation, as if the U.S. did not have a massive job-killing trade deficit. An example is the hilarious statement about 10 million U.S. jobs being supported by exports in 2008 – a year we had a $696 billion deficit – without any reference to the net U.S. jobs effect of the flood of imports underlying that deficit. The report also fails to mention that 5 million net U.S manufacturing jobs – one out of every four – have been lost since the World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA) went into effect, or the downward pressure our current trade policies are putting on wages across the economy.

Continue reading "USTR’s 2010 Trade Policy Agenda: The Good, The Bad, and the Bizarre" »

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5,500 is Just the Beginning

Last Friday's rally and protest at the soon-to-close Whirlpool plant in Evansville, Indiana drew a massive crowd. Organizers said 5,500 protesters joined the day's actions against the corporate greediness of Whirlpool's - which just received $19 million in federal stimulus money for job creation! Protesters demanded Whirlpool reverse its plan to shift good 1,100 jobs to Mexico - a move facilitated by unfair trade deal-in-chief: NAFTA.

The AFL-CIO has already produced a short video of highlights from the actions:

And this is only the beginning. Imagine how workers in Evansville would react if the President tried to pass yet another NAFTA-type trade deal - like one with South Korea where the U.S. auto industry takes on it on the chin. Now imagine what happens if they tried to pass one with tax haven Panama or unionist murder capitol Colombia!

Clearly, U.S. workers, facing some of the hardest economic times in memory, won't stand idly by while their families' futures are washed down the drain by corporate greed and bad trade policy. That's why they're mobilizing behind the TRADE Act - the comprehensive trade reform bill - and pressuring to hold President Obama accountable to his campaign promises.

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Fighting To Save Jobs in Evansville

Any minute now, the huge rally to save 1,100 good, family-supporting union manufacturing  jobs will begin. Brother Richard Trumka, president of the national AFL-CIO, will headline the event, along with other local labor and elected officials.

IUE CWA - Whirlpool
Trumka has and Oped in today's Evansville Courier & Press that shows the stakes:

After more than 50 years, Whirlpool is turning its back on Evansville — shipping hundreds of good local jobs to Mexico despite the company's healthy profits and millions of taxpayer dollars in federal economic stimulus money.

We need jobs. And we can't stop in Evansville.

We have to take the fight to every company that wants to cut out on America's workers, to the big banks that ruined our economy and to elected officials who refuse to stand up for working families.

When companies such as Whirlpool choose cheaper labor and lax environmental standards over America's workers, consumers and communities, we're going to let them know we won't stand for it.

There's a lot at stake, both nationally and here in Evansville.

Brother Trumka is right indeed. It's a national policy problem that requires a national policy solution. The fight is not just going on in Evansville, but in towns like Newton, Iowa and Galesburg, Illinois, and all throughout the country where good manufacturing jobs being are lost to lower wage countries like Mexico. Thanks to unfair policies like NAFTA, that's where the Whirlpool jobs will go thanks.

That's why we need to pass forward-looking reforms like the TRADE Act that allow for a sane manufacturing policy that creates good jobs right here in the U.S.

For more on the local buildup to today's rally, check out:

~ WFIE's coverage of the Whirlpool Corporation's threat letter to displaced workers who plan to participate in today's action, and ongoing protest preparations, or

~ The local Fox affiliate's continuing coverage of how the threat letter steeling the union's resolve, or

~ The Evansville Courier & Press Editorial expressing some limited solidarity with displaced workers marching against the 'recommendation' of their unfaithful boss:

Cobern [local Whirlpool manager] said in his letter that the decision to close the Evansville plant is final and will not be reconsidered....

In the meantime, allow these workers the freedom to express their frustration and disappointment at seeing their employer pack up for the trip to Mexico.

It has to hurt.

Hurt must barely begin to describe it. But here's hoping that pain will give way to anger at the unfair trade policies and corporate greed at the root of the problem/ Then that anger can transform into organizing to build another world in which the needs of normal hard-working women and men of the world come first!

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Whirlpool: Taking Tax Dollars, Taking Jobs

It can barely get greedier than this: We're in tough economic times, so Whirlpool receives $19 million in taxpayer funds to create jobs. Then it turns around and announces it will shutter its Evansville, Indiana refrigerator plant and displace the 1,100 workers there. Disgusting.
WHIRLPOOL_8_2009
And where, you might ask, will those jobs go? They'll follow so many other lost family-supporting jobs on the NAFTA train to Mexico.

But workers are hoping to make the planned Evansville closing a turning point in the battle for American manufacturing, and are fighting to keep the plant open. The president of the national AFL-CIO, Richard Trumka, is scheduled to speak tomorrow at a major rally to keep plant open. Many hundreds are expected to join the demonstrations from across the region and the country.

The union representing the Whirlpool workers, IUE-CWA Local 808, is fighting fiercely. Financial Secretary of Local 808, Barbara Reich, lays it bare on evening news of the local Fox affiliate:

We need to bring to the attention of the American public when a so-called - in my opinion - American company gets American tax dollars, $19 million American tax dollars to create jobs, then they should not be taking existing American jobs to Mexico or China... We need those jobs right here in this community.

Sister Reich is right. It's a long shot that the plant will stay open, but workers are rallying to a higher cause. Under the influence of unfair NAFTA/WTO-style trade policies, manufacturing job loss has hobbled the country's economic prospects. Working people in Evansville are fighting not just to keep the plant open, but also to change the policies of "taking these jobs to other countries."

That's why solutions like the TRADE Act that correct our failed trade policies, are a crucial element of this fight. Indiana Representatives Visclosky, Donnelly, and Carson have endorsed the comprehensive reform legislation, but 8th District Rep. Brad Ellsworth, who is expected to speak at the rally and whose hometown is Evansville, has yet to sign on. Hopefully he'll see the light and join the growing reform consensus.

Mobilization and protest are another critical element of the fight. So tomorrow - Friday, February 26th - working families will assemble in Evansville to say, enough!

Continue reading "Whirlpool: Taking Tax Dollars, Taking Jobs" »

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GOP Turnaround on Buy American: Genuine Concern or Opportunism?

Mike Elk over at Campaign for America’s Future points out that the leadership of the Republican Party has flip flopped over the limited “Buy American” provisions in the stimulus bill.  This debate is particularly salient now, since the U.S. just watered down the Buy American requirements when it comes to Canada. Mike Elk explains how Michael Steele has made a U-turn on Buy American:

GOP Chairman Michael Steele blasted the Obama administration in a fund-raising email earlier this week for allowing stimulus money designated for clean energy solutions to be spent on overseas companies. Which is interesting, because stimulus money going to overseas firms was the direct result of conservative opposition to attempts to keep that money in America.

Notwithstanding Republican leaders’ huffing and puffing about “protectionism” one day and offshoring the next, Buy American isn’t a partisan issue.  As Mike points out, 86 percent of Americans support the Buy American provisions of the stimulus legislation, including 79 percent of Republicans.  If the Republican Party’s position on Buy American has actually changed, then they should say it loud and clear.  As of now, though, it just seems that Steele is attacking the Obama administration simply for partisan gain.

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Why Countries Sign Trade Deals "Against Their Interest"

"If NAFTA-like trade deals are so bad for developing nations, why are they lining up to get on board?"

Hand out enough fair-trade leaflets on campus, and you'll get asked this question soon enough by some smart ass from the Libertarian Debating and Choral Arts Society, or whatever the equivalent is at your school.

The Wall Street Journal provides clues that should inform your answer:

Manuel Medina-Mora has long had ambitions of running Citigroup Inc. He is getting closer.

After more than a decade as chief executive at Grupo Financiero Banamex, the Mexican banking company that is one Citigroup's choicest businesses, the 59-year-old Mr. Medina-Mora resigned last week to devote more attention to a daunting new job. The Mexican banker has to somehow turn around Citigroup's struggling consumer-banking operations world-wide...

Mr. Medina-Mora's growing power reflects his leadership of operations that stayed out of the headlines as much of Citigroup suffered through the financial crisis. Banamex and other Citigroup operations in Latin America overseen by Mr. Medina-Mora had $12.1 billion in net revenue last year, or about 20% of the total for Citigroup's core businesses.

Michael Mayo, a managing director and banking analyst at Calyon Securities, says Mr. Medina-Mora "has led one area of Citigroup that hasn't had significant issues." Banamex is a favorite of Mr. Pandit, who has praised its "universal bank" model of cooperation between different parts of the bank as Citigroup's future.

"We're going to export it around the world," Mr. Pandit said in 2008. The CEO has dispatched executives to Mexico to learn more about Mr. Medina-Mora's successful formula.

(Exporting the "universal banking" model around the world? Where have we heard that before?)

Turning to a helpful magazine profile of "the most influential and important people in Nafta commerce and finance" in the magazine Global Finance, we learn that:

Manuel Medina-Mora has been chairman and CEO of Citi Latin America and Mexico since 2004. Citi was a key promoter of Nafta and provides corporate finance for Mexican and foreign companies through its Banamex Mexican subsidiary. He started his career with Banamex in 1971 and in 1990 led Banamex’s privatization. In 1991 he became the deputy president responsible for Grupo Financiero Banamex-Accival’s strategy and corporate development and was appointed its CEO in 1996 and CEO of Banamex from 2001 to 2006.

In other words, local corporate honchos look North, see a way to climb up the corporate ladder by privatizing a national asset, advocating for a flawed trade deal, and letting a bigger corporation get in on a piece of the pie. And by the way, said flawed trade deal gives the big foreign corporation outrageous rights to make sure that the pie keeps coming.

By the time millions of your countrymen are left out of work and your country has been taken over by drug-traffickers, you've got a golden elevator up to a new global throne.

Folks, Mexico didn't sign up for anything. People like Medina-Mora signed Mexico up for NAFTA. Now, the rest of Mexico is left trying to pick up the pieces.

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New Year’s Resolutions for the Obama Administration

With a number of important and high profile trade battles to be fought this year that will have far-reaching impacts on the U.S economy and domestic policy, we thought we’d suggest some New Year’s resolutions for president Obama to adopt on U.S. trade policy.

These resolutions are solutions that the administration needs to commit to in 2010, based on what's likely to move in the trade sphere this year. They hold President Obama to his campaign promise to deliver trade policy reform, and they’ll also help to fix the economy and keep good jobs in America.

The resolutions are:

  1. Push to modify World Trade Organization (WTO) limitations on domestic financial services regulation, in light of the economic crisis. Go here for details.
  2. Conduct a comprehensive review of trade agreement policy as promised during the campaign
  3. Announce formal new trade agreement approach that brings trade pacts into congruence with the administration’s domestic priorities and goals
  4. Pass climate legislation with meaningful border equality measures
  5. Pass second major stimulus bill with robust Buy America provisions to create jobs
  6. Pass food safety bill with serious import safety protections
  7. Use the Trans-Pacific Partnership talks to devise a replacement for the NAFTA model; we either need a new way or no deal
  8. Renegotiate remaining Bush trade agreements with South Korea, Colombia, & Panama to fix NAFTA model problems and bring them in line with the TRADE Act.
  9. Give the WTO’s “Doha Round” agenda a much needed burial and develop a new agenda related today's challenges aimed at fixing WTO problems, from financial services deregulation to limits on climate crisis redress space
  10. Fight for a China trade policy that supports jobs and also ensures product and food safety for both countries

Obama has already resolved to do a lot of these, but just as with most New Year’s resolutions, he’s somewhat fallen off the wagon.  We’re here to help him resolve anew and stick to it!

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Americans Say NAFTA-style Agreements = Job Losses

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

A poll conducted by the Pew Research Center in November has found that the public holds deep misgivings about the WTO and trade agreements like NAFTA.

In an atmosphere of 10 percent unemployment, about 52 percent of those surveyed believe that "free trade" agreements lead to job losses, while only 13 percent believe that the agreements create jobs. The remainder of those surveyed didn't have an opinion, refused to answer, or thought trade agreements didn't affect employment.

Only 11 percent of respondents believed that free trade agreements make the wages of Americans higher, but 49 percent believed that trade agreements reduce American wages.

The survey also reveals quite a disconnect between the views of the foreign policy elite and the views of the public at large: 88 percent of the members of the Council on Foreign Relations believe that these trade agreements are a good thing for the United States, which is more than double the proportion of ordinary Americans who believe the same.

Another interesting finding in this poll is the degree of opposition to "free trade" agreements among Republicans and independents. About 36 percent of both Republicans and independents believe that trade agreements are a bad thing, which is a greater degree of opposition that even Democratic voters exhibit.

Democratic candidates for Congress must keep in mind that in order to prevail in the midterm elections they must retain the independent and Republican voters that they gained in 2008, so running on a fair trade platform can only help expand their appeal.

Read the report here


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The Return of the NAFTA Election Cycle?

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

As we throw out the old calendar and enter an election year, Democratic and Republican party leaders are busy figuring out their electoral strategies.  Various Democratic strategists, for their part, are running through the familiar arguments about appealing to independent voters versus rallying the base.  Arguing for a rally-the-base approach, Democratic strategist Steve Rosenthal reminds us that voters punished the members of Congress who pushed though a bad trade pact one fateful election cycle:

In 1994, the year Republicans swept to power in the House and Senate, union members were demoralized and stayed home because the Clinton administration had fought vigorously to pass NAFTA and backed down on health care reform.

Economist Paul Krugman also argues this NAFTA point while discussing the Republican strategy: “The idea that NAFTA was a big plus for Clinton, coming from Rahm Emanuel of all people, is just too bone-headed for words.”

Fortunately for everyone involved, the choice between fair trade and NAFTA-style agreements is not a choice among appealing to liberal, conservative, or moderate voters.  Polls have demonstrated that voters of all stripes are fed up with the NAFTA model, particularly in swing states.  Fair trade candidates elected in 2008 now have the seats in Congress to prove it, which makes clear that support of the NAFTA model is a losing strategy, while supporting the TRADE Act might be a way to win.

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Jagdish Bhagwati gets it. He really gets it.

Jagdish Bhagwati, "free trader" extraordinaire, gave an interview to Reason Magazine, and made some very fair trade-sounding points:

There is another thing to worry about. When you look at a trade agreement like NAFTA, it’s about that thick (holds his hands about two feet apart). When I debate people like Lori Wallach of Public Citizen, she arrives with a lot of books, and among them is this NAFTA treaty she carries for effect. I hope she gets a hernia from doing this often enough, because it looks pretty heavy to me. I wouldn’t be carrying it around. Anyway, she shows this book and asks, “Is this free trade?” And mad as she is, she’s right to raise that issue. You should be able to say maybe in 10 pages that in these sectors we are going to liberalize and so on. But nine-tenths of what’s in these agreements are things which have nothing to do with trade. Labor standards, environmental standards, intellectual property rights. If I were Jane Fonda, in order to sell more workout tapes, I could put into the agreement a clause that the president of Mexico has to do his exercise to my tapes. And it would go in, because ours is a lobbying culture and nobody really would know that it’s there. Because who opens these things except the lobbyists?

So many developing countries are now waking up to the fact that they’re being sold a bill of goods in the form of trade agreements.

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U.N. Report Shows Global Wages Falling

On Nov. 3 the U.N. agency on labor, the International Labor Organization (ILO), released a 15-page report finding that real wages fell in countries around the world, including the U.S. and some other wealthy nations, raising questions about whether workers are sharing in any global economic recovery.

The report included data from 35 countries, and found that monthly wages have fallen almost 2 percent in the U.S. since January 2009. The ILO found that inflation-adjusted wage growth fell sharply around the world in 2008 to 1.4 percent, down from 4.3 percent in 2007, and wages continued to fall in a number of countries in 2009.

This continuing drop in real wages around the world illustrates the need for trade policies and agreements that protect workers’ rights and prevent a further “race to the bottom” in global wages. Fair traders have long warned that trade agreements such as NAFTA, CAFTA, and other NAFTA-type trade agreements would deflate wages and threaten workers’ rights. The ILO’s report on the drop in real wages for workers in the global economy is disturbing and makes a strong case for renegotiating these pacts and preventing new trade agreements based on the flawed NAFTA model.
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The Stuff Nightmares Are Made of…

Just in time for Halloween, we’ve found a truly scary article about unprecedented NAFTA expansion: Erik Heinrich of CNN predicts that the upcoming conclusion of a “free trade” agreement between the European Union and Canada will likely begin a push for a NAFTA-EU trade zone, which would encompass nearly a billion people and would account for more than half of the world’s total GDP.

The president of Canadian Manufacturers & Exporters, the country’s largest trade and industry association, has said “the largest benefits will come from economic integration,” referring to increased foreign direct investment and access to government procurement, the very provisions of NAFTA fair traders have flagged as some of the most damaging aspects of the agreement and others based on the NAFTA model.

According to Steven Schrage of the Center for Strategic and International Studies (CSIS), (who opines that “it makes sense to integrate NAFTA with the EU,”) the Bush administration had a NAFTA-EU deal on its radar, but failed to make progress: “The ball is in the Obama administration’s court.” CNN does concede that a NAFTA-EU trade deal would likely be met with stiff opposition in the United States.

What an interesting way to sell this deal to the Obama administration: “The Bush administration thought this was a great idea!” I am comforted that Obama has expressed that he is fully aware of what he calls “NAFTA’s shortcomings” and has made a variety of trade promises that suggest he has no interest in continuing the Bush administration’s failed trade initiatives. As for Congress, the desire for a new trade agenda is illustrated by support for the Trade Reform, Accountability, Development and Employment (TRADE) Act, which currently enjoys support from 123 Democrats and two Republicans in the House of Representatives, including 10 committee chairs, 52 subcommittee chairs, and wide swaths of the Democratic Blue Dog Coalition, Congressional Black Caucus, Congressional Hispanic Caucus, and the New Democrat Coalition.

It still freaks me out, though.
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Walking the Line

ImHungryStopNAFTAUp here in the Global Trade Watch field loft, we love a good picket line. This one, however, brings a special joy to our heart. Autoworkers from the UAW's Local 174 based in Romulus, Michigan made a trek down to Brownsville, TX to protest our broken NAFTA-style trade policies. 

The Brownsville Herald Reports that the picketers denounced the greed that drives NAFTA-style globalization:

"We are losing our jobs on this side, and (American corporations) are paying workers low wages on the other," Local 174 UAW President John Zimmick said at the protest, wiping a sweaty brow. "Why can’t they pay workers what they are worth?

Its heartening to see these unionists take a 28 hour drive to stand in solidarity with their brothers and sister autoworkers, regardless of nationality. These UAW leaders and activists demanded better for auto employees in both the U.S. and in Mexico. The Herald continues:

This was the second demonstration staged by the group, which took to marching in front of the Hidalgo-Reynosa International Bridge Monday afternoon. At that time, workers also gathered at a street corner on the Mexican side of the bridge to protest what they said were unfair layoffs at a TRW Automotive maquiladora in Reynosa. TRW Automotive is a supplier for Ford Motor Co. and Chrysler.

"We want trade, but we want it to be just," said Martha Ojeda, executive director of the Coalition for Justice in the Maquiladoras, adding that the 600 TRW Automotive workers dismissed from their jobs did not receive severance pay or unemployment benefits as they would in the United States.

Couldn't have said it better ourselves. We need FAIR trade, just trade, like envisioned in the TRADE Act to rebuild our economy. That's why the TRADE Act is supported by nearly half the House Democrats and two Republican Representatives as well.

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CAFTA Signatory Honduras Falls Victim to a Coup

Recently ousted Honduran President Manuel Zelaya was in Washington, DC earlier this month and met with Secretary of State Hillary Clinton. Zelaya was roused from bed at gunpoint by the Honduran military, forced on a plane, and flown to Costa Rica in June. Since then, the de facto government has violated civil liberties left and right: The Huffington Post reports that Zelaya supporters have been killed, hundreds of people have been assaulted by armed forces, and over a thousand have been illegally detained. Meanwhile, press and media outlets have been shut down and journalists have been arrested and detained. 

Zelaya was criticized by Honduran elites for his progressive policies: During his tenure, Zelaya’s administration raised the minimum wage, gave out free school lunches, provided pensions for the elderly, distributed energy-saving light bulbs, decreased the price of public transportation, expanded scholarships for students, and passed legislation to protect the environment. He enjoys broad popular support, especially from unions, human rights groups, indigenous groups and peasant associations. 

The situation in Honduras has a number of important implications: Fair traders have long argued that NAFTA-style deals promote instability and now Honduras, a signatory to CAFTA, has suffered Central America’s first coup since the Cold War. CAFTA was approved in Honduras by local elites, the same interests who are threatened by Zelaya’s progressive policies. The instability in Honduras is an illustration of how NAFTA-style trade agreements can undermine democratic governance in member nations.
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