Source: https://citizen.typepad.com/eyesontrade/andean_and_panama_ftas/
Timestamp: 2019-04-21 10:20:02+00:00

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Today’s release of the corrected 2014 annual trade data from the U.S. International Trade Commission reveal that President Barack Obama’s goal of doubling exports has failed dramatically, with a growing trade deficit with Korea under the U.S.-Korea Free Trade Agreement (FTA) and a burgeoning non-fossil fuel trade deficit with North American Free Trade Agreement (NAFTA) partners. Even as overall U.S. exports increased slightly due to growing U.S. fuel exports, manufacturing exports stagnated, according to projections. The data show that continuing with more-of-the-same trade policies would kill more middle-class jobs, dampen wages and increase income inequality – outcomes contrary to Obama’s “middle-class economics” agenda. The abysmal trade data are likely to reinforce congressional opposition to Obama’s bid to expand the status quo trade model by Fast Tracking the Trans-Pacific Partnership (TPP).
of his 2010 State of the Union trade initiative – a plan to double U.S. exports in five years. The 2014 data show U.S. goods exports over those five years have increased by just 36 percent, falling more than $660 billion short. U.S. goods exports grew by less than 1 percent in 2014 – the same average rate of the prior two years. (The first two years of stronger export growth represented recovery from the worldwide crash in trade flows after the global financial crisis.) At the paltry 2012-2014 annual export growth rate, which is a fraction of the 4 percent average annual export growth seen in the decade before the Obama administration, Obama’s export-doubling goal would not be reached until 2057 – 43 years behind schedule.
U.S. Exports Declined Under the Korea FTA, While Imports and the U.S. Trade Deficit with Korea Soared: Today’s data release also reveals a 14 percent increase in the U.S. goods trade deficit with Korea in 2014, marking the third consecutive year of substantial growth in the U.S. trade deficit with Korea since the 2011 passage of the Korea FTA, which U.S. negotiators used as the template for the TPP. The 2014 U.S. goods trade deficit with Korea topped $26 billion, a 72 percent increase over the trade deficit in 2011 before the FTA took effect. U.S. exports remain lower than the level before the FTA went into effect, as imports have increased 17 percent. Had U.S. exports to Korea continued to grow at the rate seen in the decade before the FTA’s implementation, exports would be about 18 percent, or $7 billion, higher in 2014 than they actually were. The resulting trade deficit increase represents more than 70,000 lost American jobs, according to the ratio the Obama administration used to project gains from the deal. Ironically, 70,000 is the number of jobs the Obama administration promised would be gained from the Korea FTA.
Non-Fuel NAFTA Trade Deficit Grows: The 2014 trade data are also projected to show a more than 12 percent, or $10 billion, increase in the non-fossil fuel U.S. goods trade deficit with NAFTA partners Canada and Mexico. The overall U.S. goods trade deficit with NAFTA partners, which also increased in 2014, has ballooned $155 billion, or 565 percent, under 21 years of the pact, reaching $182 billion in 2014.
Contrary to the Administration’s TPP Sales Pitch That More FTAs Would Boost U.S. Exports, U.S. Exports to FTA Partners Have Grown More Slowly Than U.S. Exports to the Rest of the World Over the Past Decade. Taking into account the data for 2014, average annual U.S. export growth to all non-FTA partners in the past 10 years outpaced that to FTA partners by 24 percent.
The United States Has a Large Trade Deficit with FTA Partners: Overall, the aggregate U.S. trade deficit with all U.S. FTA partners topped $177 billion in 2014, marking a more than $143 billion, or 427 percent, increase in the aggregate U.S. FTA trade deficit since the pacts were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $95 billion, or 11 percent, since 2006 (the median entry date of existing FTAs). Despite this, U.S. Trade Representative (USTR) Michael Froman testified to Congress last month that we have a trade surplus with the group of FTA nations.
Given that the record of lagging U.S. exports and surging trade deficits under U.S. FTAs jeopardizes Obama’s prospects for obtaining Fast Track, the administration may try to obscure the results with distorted data. The USTR has taken to lumping foreign-made products in with U.S.-produced exports, which artificially inflates U.S. export figures and deflates U.S. trade deficits with FTA partners.
“Foreign exports,” also known as “re-exports,” are goods made abroad, imported into the United States, and then re-exported without undergoing any alteration in the United States. Foreign exports support zero U.S. production jobs. Each month, the U.S. International Trade Commission (USITC) reports trade data with foreign exports removed, providing the official government data on made-in-America exports. But the USTR likely will choose to use the uncorrected raw data, as it has in the past, that the U.S. Census Bureau released last Thursday, which counts foreign-made goods as U.S. exports. Our figures are based on the corrected data.
By using the distorted data, the USTR may errantly claim an aggregate trade surplus with all U.S. FTA partners, though the actual 2014 U.S. goods trade balance with FTA partners is a more than $177 billion trade deficit. By counting foreign exports as “U.S. exports,” the USTR can artificially eliminate more than two-thirds of this FTA deficit, shrinking it to less than $57 billion. The USTR may misleadingly claim an FTA trade surplus by then adding services trade surpluses with FTA partners, which pale in comparison to the massive FTA trade deficit in goods when properly counting only American-made exports.
The USTR also may repeat its bogus claim that the United States has a trade surplus with its NAFTA partners by errantly including foreign exports as “U.S. exports,” removing fossil fuels and adding services trade data. But even after removing fossil fuels (coal, oil and natural gas) and adding services trade surpluses, the United States still had a projected NAFTA trade deficit of $50 billion in 2014. Indeed, the fossil fuels share of the NAFTA trade deficit declined in 2014, and U.S. exports of services to NAFTA partners fell, according to projections. The USTR can make its errant claim of a “NAFTA surplus” only by including foreign exports, which artificially reduces the NAFTA goods trade deficit to less than half of its actual size.
The USTR also may boast about an increase in U.S. exports to Korea in 2014, while ignoring the much larger increase in imports from Korea. While U.S. goods exports to Korea in 2014 increased by $2.3 billion, imports from Korea have risen by $5.6 billion, spelling a $3.3 billion increase in the U.S. goods trade deficit with Korea in the third calendar year of the Korea FTA.
Moreover, U.S. exports to Korea have declined since the FTA went into effect and did not return to the pre-FTA level in 2014. Monthly imports from Korea repeatedly broke records in 2014, such as in October when imports from Korea topped $6.3 billion – the highest level on record.
Expect the administration to repeat the same data trick it employed last year with respect to U.S. auto sector exports to Korea. Exports to Korea of U.S.-produced Fords, Chryslers and General Motors vehicles increased by fewer than 3,100 vehicles per year in the first two years of the Korea FTA. But given that exports of “Detroit 3” vehicles before the FTA were also tiny – fewer than 8,200 vehicles per year – the USTR expressed the small increase as a significant percentage gain in a press release. The USTR did not mention that more than 184,000 additional Korean-produced Hyundais and Kias were imported and sold in the United States in each of the Korea FTA’s first two years, in comparison to the two years before the FTA, when Hyundai and Kia imports already topped 1 million vehicles per year.
On the fifth anniversary of a deadly confrontation in Peru spurred by controversial policies enacted to comply with the U.S.-Peru Free Trade Agreement (FTA), Amazon Watch and Public Citizen expressed extreme concern over recently revealed U.S. diplomatic cables showing the U.S. government’s role in the violence that resulted in the deaths of at least 32 people.
On June 5, 2009, Peruvian security forces attacked several thousand indigenous Awajun and Wambis protestors, including many women and children, who were blocking the “Devil's Curve,” a jungle highway near Bagua, 600 miles north of Lima. The protestors were demanding revocation of decrees providing new access to exploit their Amazonian lands for oil, gas and logging that had been enacted to conform Peruvian law to FTA requirements.
Public Citizen received only heavily redacted diplomatic cables in response to a Freedom of Information Act request regarding the U.S. role in the 2009 Peruvian crisis over FTA implementation. But now WikiLeaks has published the full text of messages between the State Department and the embassy in Lima.
Four days before the killings, a cable addressed the growing indigenous protests, stating, “Should Congress and [Peruvian] President Garcia give in to the pressure, there would be implications for the recently implemented Peru-US Free Trade Agreement.” This mirrored public comment by Peruvian government officials who argued that acceding to indigenous demands to annul controversial new laws would doom the entire FTA.
U.S. officials argued that the Peruvian government was being too lenient by allowing the indigenous roadblocks to continue. “The government's reluctance to use force to clear roads and blockades is contributing to the impression that the communities have broader support than they actually do,” the cable read.
On the day of the killings, the U.S. Embassy in Lima sought to justify the government’s actions, stating in another cable that the security forces in Bagua had “reluctantly chosen to enforce the rule of law.” Unacknowledged was the fact that the groups blocking the road at the “Devil’s Curve” had expressed their intention to demobilize on June 5 starting around midday. The Peruvian riot police went in that morning at the break of dawn.
In a letter sent on June 12, 2009, 15 nongovernmental organizations urged the Obama administration to speak out publicly against the violent repression and to state that repeal or reform of the controversial laws would not conflict with Peru’s obligations under the FTA. No public statement was issued.
What has become known as the “Amazon’s Tiananmen” brought the realities of the U.S.-Peru FTA into sharp relief. Rather than being a new trade agreement model, as it was sold, at the FTA’s heart were the same extreme investor rights that animated the North American Free Trade Agreement (NAFTA).
When Congress passed the U.S.-Peru FTA in late 2007, a majority of House Democrats opposed the deal. And no labor, environmental, consumer, family farm or faith group supported it. While Democratic House trade committee leaders had forced some improvements with respect to access to medicine and the FTA’s labor and environmental chapters, the pact included an expansion of NAFTA-style investor privileges.
The FTA’s foreign investor privileges were demonstrated when a U.S. firm pressured Peru’s government to reopen a smelter that had severely poisoned hundreds of children in La Oroya, Peru with lead – a story revealed in a Bloomberg exposé.
Now the Obama administration is pushing for inclusion of the same extreme foreign investor privileges in the TPP it is negotiating with Peru and 10 other Pacific Rim countries.
Today, as foreign-owned factories in Vietnam lie smoldering after protesting Vietnamese workers burnt them to the ground, Obama administration officials are in Vietnam negotiating a Trans-Pacific Partnership (TPP) pact that would place U.S. workers in direct competition with their Vietnamese counterparts.
While politics provided the spark for Vietnam’s recent worker riots, the country’s notorious working conditions fanned the flames. According to the U.S. government, the International Labour Organization, and workers' rights groups, those conditions include “children working nine to 12 hours per day for low pay in hazardous working conditions,” forced labor, discrimination against pregnant women, blocked fire exits, prohibition of independent unions, and minimum wages dwarfed by those paid in China.
Members of Congress, U.S. labor unions and human rights groups have made clear that the U.S. government should not be contemplating a pact with a country where workers’ rights are systematically violated.
That same argument motivated widespread opposition to the U.S.- Colombia “free trade” agreement (FTA), which took effect two years ago today.
After two years of FTA implementation, that promise rings hollow as Colombia’s unionists face persistent murders, death threats, and repression.
Now, in response to growing opposition to the notion of a TPP pact with Vietnam, the Obama administration is conjuring up the same failed promise, asserting that working conditions in Vietnam will improve under the pact.
In the three years since the LAP was unveiled, 73 Colombian unionists have been murdered. There were four more unionist murders in 2013 than in 2012.
Colombia’s union workers have endured 31 murder attempts and 953 death threats since the LAP was announced. These crimes have not resulted in any captures, trials, or convictions.
More than 3,000 unionists have been murdered in Colombia since 1977. The overall impunity rate for these murders is 87%.
Since 1977, Colombian unionists have received 6,262 recorded death threats. Only 4 of these threats have been punished, meaning that impunity for anti-union death threats stands at 99.9%.
Forced labor: Individuals detained, but not convicted, for drug offenses are required to work for little to no pay in government detention centers as part of their “treatment,” according Human Rights Watch and the State Department. Vietnam is one of just four countries in the world cited by the U.S. Department of Labor for using both forced labor and child labor in apparel production.
Low wages: Vietnam’s average minimum wage is 52 cents per hour. That’s a fraction of minimum wages even in China. And it’s one-fourteenth of the earnings of U.S. minimum wage workers who would be pitted against their Vietnamese counterparts.
Unsafe working conditions: The International Labour Organization reports that even after inspecting Vietnamese garment factories on three occasions for fire hazards, 41% of the inspected factories still had inaccessible or blocked fire exits.
Violations of women’s rights: Vietnamese factories have employed several discriminatory methods to try to avoid the legal obligation to provide paid maternity leave to pregnant workers. Last year the Vietnamese press revealed that one factory required female workers to sign a contract vowing not to get pregnant for their first three years of employment.
In the face of such entrenched labor abuses, it is incredible that the administration is trotting out the same message used for the Colombia FTA: “Don’t worry –- workers’ conditions will improve once the FTA is in place.” After two years of the Colombia deal, Colombia’s workers sadly beg to differ.
When launching a new series of materials touted as “fact-based analysis,” it is unwise to begin with a distortion of the facts. But that’s the inauspicious move taken today by the Emergency Committee for American Trade (ECAT), a corporate alliance that has launched a new “Trade Notes” series with some confused data on the record of U.S. trade under “free trade” agreements (FTAs).
Official government data show that U.S. trade deficits have ballooned with FTA partners while actually diminishing with the rest of the world. As we reported recently, the aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion, or 443%, since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries (even including China) has decreased by more than $130 billion, or 16%, since 2006 (the median entry date of existing FTAs).
Two factors explain this proclivity toward trade deficits with FTA partner countries. First, imports from those countries have spiked – an unsurprising result of a trade model that has incentivized offshoring and pitted U.S. workers against their lower-wage counterparts abroad. Second, and perhaps more surprising, is that U.S. export growth to FTA partner countries, despite all promises to the contrary, has been slower than to non-FTA countries. Indeed, growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.
How can ECAT make this claim? First, they take oil and gas out of the trade data. Echoing the refrain of many FTA proponents that burgeoning FTA deficits are just about oil imports, ECAT displays a chart that appears to show aggregate non-oil trade deficits with FTA partners diminishing and then turning into surpluses over the last decade.
But the official government data beg to differ. Even if we remove oil and gas, the non-oil U.S. goods trade balance last year with all U.S. FTA partners was a $100 billion deficit, not a surplus. And while ECAT claims that the non-oil trade balance with FTA countries has been improving, the non-oil U.S. trade deficit with these 20 countries was larger last year than in any of the last six years.
What, then, explains the gulf between the data and ECAT’s claim of a growing non-oil surplus with FTA countries? The primary explanation is that ECAT – like the U.S. Trade Representative and fellow corporate conglomerates such as the Chamber of Commerce, National Association of Manufacturers, Business Roundtable, etc. – has decided to count foreign-made exports as U.S. exports. As we’ve explained time and again, determining FTAs’ impacts on U.S. jobs requires counting only U.S.-made exports. Instead, ECAT also counts “re-exports” – goods made abroad that are shipped through the United States en route to a final destination. As re-exports to FTA partner countries have been steadily increasing, counting them in trade data – as ECAT does – has had an increasingly distortionary effect on the true record of FTAs (e.g. you can make the NAFTA deficit look half as big simply by counting foreign-made re-exports as U.S. exports).
We’re all for contributions to fact-based dialogue. Let’s hope we start seeing some from ECAT.
Three years ago, the Obama administration signed a Labor Action Plan (LAP) with the Colombian government, promising that it would help rectify rampant labor rights abuses in Colombia, a country in which more than 3,000 unionists have been murdered since 1977.
Six months after its announcement, the LAP served as a fig leaf for the controversial Colombia “free trade” agreement (FTA), enabling the deal’s passage in the U.S. Congress. Trying to fend off criticism for pitting U.S. workers against Colombian workers who faced widespread labor abuses, the few Democratic members of Congress who voted for the deal pointed to the LAP as a solution to Colombia's labor rights crisis.
Unions and congressional labor rights defenders in Colombia and the United States warned at the time of the FTA’s passage that the LAP would fail to alter the on-the-ground reality of anti-union repression.
In the three years since the LAP was unveiled, 73 Colombian unionists have been murdered, according to a report released today by Colombia’s National Union School, a group recognized by the LAP as an authoritative source of monitoring data. There were four more unionist murders in 2013 than in 2012.
Colombia’s workers have also endured 31 murder attempts and 953 death threats since the LAP was announced. These crimes have not resulted in any captures, trials, or convictions. The overall impunity rate for unionist murders from 1977 through the present is 87%, while impunity for anti-union death threats stands at 99.9%.
The same, unfortunately, could probably be said about some members of the U.S. Congress who were more interested in the LAP’s ability to provide political cover for the polemical Colombia FTA than its ability to provide relief to Colombia’s repressed workers.
Other members of Congress who supported the LAP with a sincere desire to improve the labor rights situation in Colombia (despite warnings from on-the-ground experts that the LAP would fail to do so) must feel betrayed by the administration officials who promised the LAP would herald such improvement.
Now the administration is making similar promises in pushing the Trans-Pacific Partnership (TPP), a sweeping deal with 11 Pacific Rim countries, including Vietnam. While Vietnam does not share Colombia's history of widespread unionist murders, workers in Vietnam are prohibited from forming independent unions and are paid an average minimum wage of 52 cents per hour. And Vietnam's apparel industry, which could gain greater access to the U.S. market through the TPP, relies on forced labor and child labor.
Administration officials are arguing, as they did in pushing the LAP and the Colombia FTA, that the TPP will provide an opportunity to curb labor rights abuses in Vietnam. Will the members of Congress who supported the ill-fated LAP once again buy into such promises? Or will they heed the lesson of the ongoing repression faced by Colombia's workers?
The aggregate U.S. goods trade deficit with Free Trade Agreement (FTA) partners is more than five times as high as before the deals went into effect, while the aggregate deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations. Incredibly, the U.S. Chamber of Commerce website states, “For those worried about the U.S. trade deficit, trade agreements are clearly the solution – not the problem.” Their pitch ignores the import surges contributing to growing deficits and job loss, while their export “data” is inflated, using tricks described below.
The aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion (inflation-adjusted) since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $130 billion since 2006 (the median entry date of existing FTAs). Two reasons: a sharp increase in imports from FTA partners and significantly lower export growth to FTA partners than to non-FTA nations over the last decade. Using the Obama administration’s net exports-to-jobs ratio, the FTA trade deficit surge implies the loss of about 800,000 U.S. jobs. Trade with Canada and Mexico (our first and third largest trade partners, respectively) contributed the most to the widening FTA deficit. Under the North American Free Trade Agreement (NAFTA), the U.S. deficit with Canada ballooned and the small U.S. surplus with Mexico turned into a nearly $100 billion deficit. The trend persists under new FTAs – two years into the Korea FTA, the U.S. trade deficit with Korea has jumped more than 51 percent. Reducing the massive trade deficit requires a new trade agreement model, not more of the same.
Growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade. Between 2003 and 2013, U.S. goods exports to FTA partner countries grew by an annual average rate of only 4.9 percent. Goods exports to non-FTA partner countries, by contrast, grew by 6.3 percent per year on average. Since 2006, when the number of FTA partner countries nearly doubled with the implementation of the Central America Free Trade Agreement (CAFTA), the FTA export growth “penalty” has only increased. Since then, average U.S. export growth to non-FTA partner countries has topped average export growth to FTA partners by 47 percent.
Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.
Counting “re-exports:” NAM has misleadingly claimed that the United States has a manufacturing surplus with FTA nations by counting as U.S. exports goods that actually are made overseas – not by U.S. workers. NAM’s data include “re-exports” – goods made elsewhere that are shipped through the United States en route to a final destination. Determining FTAs’ impact on U.S. jobs requires counting only U.S.-made exports.
Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 443 percent aggregate FTA deficit surge, its omission vastly skews the findings.
Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.
Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $251 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.
The 2014 Trade Agenda: What Hole? Keep Digging.
The President’s 2014 Trade Policy Agenda, released today by the Office of the U.S. Trade Representative (USTR), violates the first law of holes: when you are in one, stop digging. Instead, it sticks to the first rule of PR, when the data is against you (e.g. when export growth under last year's trade agenda amounted to zero percent), distract.
In the face of large U.S. trade deficits with Free Trade Agreement (FTA) partners, the report declines to count imports and counts exports when convenient. It tries to camouflage the damaging track record of past deals (“forget about the hole”) to sell to the U.S. Congress and public yet another round of FTAs (“just keep digging”).
Also omitted is the inconvenient fact that the overall growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.
Even more glaring is the report's lack of any mention of how exports to Korea have fared under the Korea FTA, which has its second anniversary in less than two weeks, despite detailing export performance to other countries. Under the Korea FTA, which served as the administration’s opening offer for the TPP negotiations, U.S. goods exports to Korea have fallen below the average monthly level seen before the FTA for 20 out of 21 months. Rather than deal with this reality, the report tries to hide it.
The data simply do not support the oft-parroted pitch that more-of-the-same FTAs are the ticket to boosting exports.
But official government data show that our manufacturing trade deficits have increased dramatically under the very trade policies that the administration vows to “continue to pursue.” Last year, we had a $52.4 billion manufacturing trade deficit with our 20 FTA partners. In 1993, before NAFTA was implemented and before 18 of these 20 countries had an FTA with the United States, we had a $30.1 billion manufacturing trade surplus with these same trade partners. In the intervening 20 years, during which the United States implemented FTAs with all of these countries, the U.S. manufacturing trade balance with these trade partners fell by $82.6 billion. According to the administration’s own figures, that amounts to a loss of more than 446,000 U.S. jobs in manufacturing alone.
When directly addressing NAFTA, the report chooses to ignore one half of the trade flow equation and focus only on exports. It fails to mention that imports from Mexico and Canada under NAFTA have swamped exports, causing the NAFTA trade deficit to soar 556 percent, reaching $177 billion last year.
And while the report claims that “the agricultural sector has been a bright spot for exports,” that has not been the case under recent FTAs. The average annual U.S. agricultural deficit with Mexico and Canada in NAFTA’s first two decades reached $975 million last year, almost three times the pre-NAFTA level. Over the last decade, U.S. food exports to Mexico and Canada actually fell slightly while U.S. food imports from Mexico and Canada more than doubled.
Food exports have fared even worse under the Korea FTA – in the first year of the deal, U.S. beef, pork, and poultry exports to Korea fell by 8 percent, 24 percent, and 41 percent respectively.
Even if one ignores the disappointing export legacy of the deals serving as the TPP’s template, this sales pitch comes across as hollow. The United States already has FTAs with six of the 11 TPP negotiating countries, for which increased market access is largely not up for negotiation. Of the remaining five TPP countries, Japan is the only major economy, and its growth rate last year was a tepid one percent – hardly the sought-after “dynamism.” The remaining four countries include Vietnam (with an annual per capita income of $1,550), Malaysia (with an annual per capita income of $9,820), New Zealand (with a population the size of metro D.C.), and Brunei (with a population the size of Huntsville, Alabama). Are these the markets on which the administration’s history-defying promise of TPP-led export growth hinge?
Members of Congress aren’t buying it. Most House Democrats and a sizeable bloc of House Republicans have said no to Fast Tracking the TPP. House Minority Leader Nancy Pelosi and Senate Majority Leader Harry Reid have also voiced their opposition. So has 62% of the U.S. voting public. Their message to the administration is simple: we’re in a hole. Stop asking for shovels. Find a ladder.
A stunning decline in U.S. exports to Korea, a rise in imports from Korea, and a widening of the U.S. trade deficit under the Korea Free Trade Agreement (FTA).
In 20 out of 21 months since the Korea FTA took effect, U.S. goods exports to Korea have fallen below the average monthly level in the year before the deal.
Zero growth in U.S. goods exports relative to 2012, placing the United States decades behind in Obama’s stated goal to double exports in five years.
The data show there is no chance to meet President Obama’s stated goal to double 2009’s exports by the end of this year. At the paltry 1 percent annual export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054, 40 years behind schedule.
A staggering U.S. trade deficit with Canada and Mexico after 20 years of the North American Free Trade Agreement (NAFTA).
The 2013 U.S. goods trade deficit with Mexico and Canada was $177 billion - a nearly seven-fold increase above the pre-NAFTA level, when the United States enjoyed a small trade surplus with Mexico and a modest deficit with Canada.
Today’s USITC data correct last week’s Census Bureau trade data to remove re-exports – goods made elsewhere that pass through U.S. ports en route to final destinations. The corrected data only heaps further doubt on Obama’s prospects for getting Fast Track trade authority, now publicly opposed by most House Democrats, a sizeable bloc of House Republicans, and Senate Majority Leader Harry Reid. Obama has asked for Fast Track to push through Congress the Trans-Pacific Partnership (TPP), a controversial deal modeled on the Korea FTA and NAFTA.
Colombia Uprising: Is This What "Free Trade" Looks Like?
Colombian farmers are dumping tons of oranges onto highways. Roadways have been blocked throughout the country. Hundreds of thousands of Colombian protestors are risking rubber bullets and even live ammunition to take to the streets.
Is this what “free trade” looks like?
Unfair trade is one of the rallying cries of the underreported protests currently wracking Colombia. Protesting groups are asking the Colombian government (among other things) to suspend and renegotiate the U.S.-Colombia “Free Trade” Agreement (FTA). Thanks largely to the FTA, which took effect in May 2012, highly-subsidized U.S. agricultural products have started to swamp Colombia’s small-scale farmers, contributing to their displacement, the deterioration of livelihoods across Colombia, and the loss of the country’s food security.
Before the FTA was passed, Colombia’s own Minister of Agriculture predicted a miserable outcome for the country’s farmers. He warned that if the asymmetric deal took effect, Colombian farmers “would have no more than three options: migration to the cities or other countries (especially the United States or bordering countries), leaving to work in drug cultivation zones, or affiliating with illegal armed groups.” Not content to accept any of those three fates, Colombia’s farmers are now making their voices heard.
Though you wouldn’t know it from most English-language media or from heads of state, last week tensions in Colombia’s countryside came to a head. But not between the military and armed groups like the FARC, the usual suspects in foreign reporting on Colombia. The source of this uprising lies in policies not up for discussion in the country’s current peace talks: the impact of the U.S.-Colombia FTA – implemented in May 2012 – and policies that have similarly afflicted Colombian campesinos (small-scale farmers).
Colombia’s campesinos launched the protests – which have overtaken the nation – because they perceive the FTA, and policies like it, to be a threat not just to their production, but their very existence.
The National Grassroots and Agrarian Strike began on August 19 when over 200,000 potato, rice, fruit, coffee, dairy and livestock farmers; miners; truck-drivers; teachers; healthcare workers; and students left their work activities and blocked roadways in 30 key corridors around the country, with the provinces of Boyacá, Valle del Cauca and Nariño being most affected.
The diverse protesters’ list of demands includes suspension and renegotiation of the U.S.-Colombia FTA, financial and political support for agricultural production, access to land, recognition of campesino, indigenous and Afro-descendant territories, the ability to practice small-scale mining, the guarantees of political rights of rural communities, and social investment in rural areas, including in education, healthcare, housing and infrastructure.
Along with roadblocks and marches, in symbolic acts intended to express their inability to earn a living and their frustration at government inertia, dairy farmers in Boyacá poured out over 6,000 liters of milk while citrus farmers in Valle del Cauca dumped 5,000 tons of oranges onto the highway.
What could possibly bring farmers to willingly destroy their own products? Campesino livelihoods have been devastated, a process that began with economic liberalization under President Cesár Gaviria in the early 1990’s and continued with a host of Colombian laws that cleared the way for the U.S-Colombia FTA. Then came the FTA itself. Just over a year old, the deal is already taking its predicted toll on Colombia’s countryside. An FTA-enabled influx of heavily-subsidized U.S. products has contributed to the breakdown of Colombia’s local economies and the displacement of its farmers, fueling the urgency of the current protests.
Despite promises of more jobs and increased exports, the balance after year one of the U.S.-Colombia FTA is dismal for Colombia. According to Colombian paper El Espectador, Colombia’s exports to the U.S. actually fell 4.5% between May 2012 and March 2013, while Colombia’s imports from the U.S. rose 19.7%. In the agroindustrial sector on which many Colombians depend for their livelihood, U.S. imports from Colombia rose 11.5%, but Colombian imports from the U.S. skyrocketed 70%. An economic study conducted prior to the FTA’s passage predicted that just such a scenario would lead to income losses of up to 70% for the vast majority of Colombia’s farmers, contributing to their displacement.
It is not only that strikers feel they cannot compete with heavily-subsidized U.S. production: they are actually prohibited from doing so. The FTA prohibits the Colombian government from subsidizing agriculture for export or domestic consumption, even as the U.S. government subsidizes U.S. agribusinesses to the tune of $15 billion each year.
Death threats against Colombian union members have remained appallingly high since announcement of the U.S.-Colombia Free Trade Agreement (FTA) Labor Action Plan according to the Escuela Nacional Sindical (ENS), the group recognized in the Plan as an authoritative source of monitoring data. The data shows that unions and congressional labor rights defenders in Colombia and the United States were sadly correct in opposing the Colombia FTA on concerns of continued violence against workers, while the Obama administration’s promises about the Labor Action Plan were incorrect, said Public Citizen on the two-year anniversary of the Plan.
More than a year after the passage of the Colombia FTA and two years after the Obama administration announced a Labor Action Plan with Colombia to improve its labor rights protections, Colombia remains the world’s deadliest place to be a union member. In the year after the launch of the Labor Action Plan, union members in Colombia received 471 death threats – exactly the same number as the average annual level of death threats in the two years before the Plan, according to the ENS data relied upon under the Plan. At least 20 Colombian unionists were assassinated in 2012 according to ENS data, while the International Trade Union Confederation (ITUC) reported 35 assassinations last year. Meanwhile, many perpetrators of the over 2,000 existing cases of unionist murders remain free.
In addition, violent mass displacements of Colombians increased 83 percent in 2012 relative to 2011, when the U.S. Congress passed the FTA, according to the Consultoría para los Derechos Humanos y el Desplazamiento. The 130 mass displacements of 2012 added to the five million Colombians who have been displaced in the world’s largest internal displacement crisis. Recent acts of horrific violence and forced displacement have occurred in venues targeted for development under the FTA, such as the port of Buenaventura, according to the Washington Office on Latin America.
Sadly, Colombian unions and human rights organizations had predicted that the Labor Action Plan would not alter on-the-ground realities. Among the unionists who have received death threats since the FTA went into effect is Jhonsson Torres, a sugar cane worker who came to Washington to plead with members of Congress not to approve the FTA until and unless labor protections improved. One year ago the general secretary of Jhonsson’s union, also under death threat, was shot and killed while walking with his wife.
Chevron is using the investor-state system to avoid paying $18.2 billion to residents of the contaminated Lago Agrio region in Ecuador (pictured above).
The U.S.-Ecuador BIT binds Ecuador to the controversial investor-state system, which uniquely empowers foreign investors to directly challenge a country’s environmental, health, and other public interest laws by claiming that they violate BIT-created investor privileges and threaten “expected future profits.” These cases skirt national court systems and are instead decided by private three-person tribunals composed of arbitrators who bill by the hour. If a corporation wins, taxpayers of the losing country are expected to foot the bill, with no cap on the awarded amount (and even if a country “wins,” they often have to pay exorbitant court fees).
Ecuador has seen some of the most egregious examples of these cases, so it is not surprising that President Correa would want to protect Ecuador’s citizens from further lawsuits. For instance, after 18 years of persistence, residents of Lago Agrio in the Ecuadorian Amazon won a historic ruling of $18.2 billion dollars against Chevron for the massive contamination of the region between 1964 and 1990 which is alleged to have caused a cancer epidemic and decimated local indigenous groups. Instead of complying with the Ecuadorian court’s ruling, Chevron has so far made good on its promise of "a lifetime of appellate and collateral litigation" in order to avoid paying out the award. To evade justice, Chevron launched an investor-state case against Ecuador under the same U.S. BIT that Correa now seeks to annul. The tribunal in that case ordered the Ecuadorian government last year to interfere in the operations of Ecuador’s independent court system so as to stop enforcement of Chevron's $18.2 billion penalty.
To add insult to injury, last October Ecuador was slammed with a record $1.8 billion judgment in a case filed by Occidental Petroleum -– the highest amount to ever come out of an ICSID tribunal. The company launched the case against Ecuador under the same U.S. BIT that Correa hopes to annul. Occidental asked for billions in damages after the company violated a contract with the government, prompting the government to terminate Occidental's investment as contemplated by Ecuadorian law. To impose a $2.4 billion penalty on Ecuador's taxpayers (including interest and fees), the investor-state tribunal employed astonishing leaps of logic that a dissenting member of the tribunal described as "egregious."
The Brazilian Parliament has refused to ratify any investor-state agreements.
India has made a move to abolish investor-state dispute clauses in Free Trade Agreements (FTAs).
South Africa is re-examining its policy on investor-state disputes and has refused to renew BITs with the EU.
Bolivia and Venezuela have also pulled out of ICSID.
Unfortunately, a leaked draft text of the investment chapter tells us that these harmful rules are being replicated and expanded under the Trans-Pacific Partnership (TPP), a NAFTA-style "free trade" agreement currently under negotiation between the U.S. and 10 Pacific Rim nations. Australia, a TPP negotiating Party, has already refused to be subjected to investor-state dispute settlement as part of the deal, and other TPP negotiating Parties have grown increasingly wary of the prospect. Now more than ever, it is crucial that other countries join the lead of Ecuador, Australia, et al. and refuse to bind themselves to a radical system that puts their environmental quality, public health, and sovereignty at risk.
Above: Nearly 150 people attend a public forum in Lima on the injustice of the Renco/Doe Run investor-state case.
Last week we traveled to Lima to participate in several events organized to raise awareness about the injustice of Renco’s $800 million investor-state case against Peru. The U.S. company has launched an investor-state attack under the Peru "free trade" agreement (FTA) on behalf of its subsidiary Doe Run, whose metal smelter in Peru has severely polluted the town of La Oroya (declared one of the ten most polluted sites in the world), leaving the inhabitants to suffer from lead poisoning, air pollution, and water contamination. Now, instead of fulfilling its contractual obligation to remediate the damage, Renco/Doe Run is demanding $800 million from Peru – money that would come out of the pockets of the same people who are already suffering from the horrendous pollution.
One of the most powerful events of the week occurred on Thursday when nearly 150 journalists, activists and community members gathered in Lima to attend a public forum to learn more about the implications of the pollution and the investor-state case for the population of La Oroya.
+ Our own Melinda St. Louis, Director of International Campaigns, noted that instead of re-thinking the investor-state system based on the situation in La Oroya, Peru is currently negotiating the Trans-Pacific Partnership (TPP), another trade agreement which will expand investor rights according to a leaked draft of the text of the investment chapter.
+Jose de Echave, Director of CooperAcción and previous Deputy Minister of Peru’s Environmental Ministry, explained how the corporation has not fulfilled its contractual obligations, and noted that the U.S.-Peru FTA is not simply about trade – it also has far-reaching social and cultural implications.
+ Matthew Porterfield, Senior Fellow and Adjunct Professor of Law at the Harrison Institute for Public Law at Georgetown University, discussed several alternative solutions to the investor-state system that other countries have already taken, including withdrawing from the International Centre for Settlement of Investment Disputes (ICSID) (a la Bolivia, Ecuador, and Venezuela), withdrawing from investment treaties (a la Ecuador, and possibly South Africa in the near future), or refusing to be a party to the investor-state provisions of the TPP (a la Australia).
+Rosa Amaro, local leader and president of the Movement for the Health of La Oroya (MOSAO), gave a moving testimony about the dire situation in her community, including the heartbreaking story of the sick children who are seeking justice, the divisions the situation has caused, and the looming lawsuit which would drain the community of the money it has earned from the company, all as a result of breathing “public” air and seeking dignified work. (Those of you who speak Spanish can find part of Rosa’s testimony here).
The events in Lima may have ended, but Peru and the community of La Oroya continue to find themselves sickened from the pollution and fighting against an unfair $800 million lawsuit. Now it is crucial that the investor-state system not be expanded through the TPP--we have already seen the damage it can do through the eyes of La Oroya.
Below: Panelists from the public forum pose with members of the La Oroya community, which has been contaminated by Renco/Doe Run's metal smelter.
Pictured Above: A press conference is held at the Hotel Melia in Lima on the $800 million investor-state case that the US-based Renco corporation launched against Peru on behalf of its subsidiary Doe Run ; HispanTV Interviews Public Citizen's Melinda St. Louis.
A press conference was held in Lima yesterday in conjunction with the events organized this week to increase awareness about the injustice of Renco’s investor-state case against Peru.
Several major Peruvian news outlets attended and were briefed on the case, including HispanTV, Gestion, El Comercio, and Servindi, among others. Featured experts presented on the dire situation in La Oroya, the implications of corporations' soaring usage of the investor-state system as an avenue to evade justice, and the increased rights that would be granted to such corporations through the TPP.
This morning, articles ran in several of the major newspapers, including Gestión, La República, and La Primera.
Australia has already announced publicly that it will not take part in the investor-state provisions of the TPP. Will Peru heed the warning of Renco / Doe Run and follow suit?
PUBLIC FORUM TONIGHT: Starting at 6 PM EST tonight, we will be live-tweeting the Public Forum over at @PCGTW. Community members will be invited to learn more from experts about Renco's investor-state attack and hear from those who have been directly affected by the pollution in La Oroya.
Yesterday, advocates of social justice in Peru kicked off a week of activities designed to increase awareness about the dangers of the investor-state system by highlighting one of the most egregious examples: the case that the U.S.-based Renco corporation has launched against Peru concerning the company's notorious metal smelter. Renco, owned by one of the richest men in the U.S., launched the investor-state attack on behalf of its subsidiary Doe Run, whose Peruvian metal smelter has severely contaminated the town of La Oroya, declared one of the ten most polluted sites in the world.
Several organizations are participating, including Public Citizen and Georgetown University’s Harrison Institute from the United States, along with RedGE, CooperAccion, Red Uniendo Manos Peru and other organizations from Peru. Rosa Amaro, the president of the Movement for Health in La Oroya (MOSAO for its Spanish initials) has also traveled to Lima to speak out on behalf of the citizens of La Oroya. The events organized for this week include a press briefing breakfast, an informational meeting for organizations in Peru, a public forum, and meetings with various government officials.
In case you haven’t been following the situation in Peru closely, the case that Renco has launched against Peru is one of the most outrageous examples of the dangers that the investor-state system poses to public health and the environment. Renco is using the system to try to evade the consequences of the massive pollution that the company has left in La Oroya and to avoid compensating those suffering from lead poisoning, air pollution, and water contamination in the company's wake.
Renco claims that the Peruvian government is attacking the corporation’s investor privileges by not granting it a third extension to comply with its unfulfilled 1997 commitment to install pollution mitigation devices in its smelter. Instead of fulfilling these promises, Renco is suing for $800 million in compensation. For more background, check out the analysis on our website.
Check back for more updates, videos, and photos of the events in Lima as the week progresses.
WASHINGTON, D.C. – The biggest scare of Halloween 2012 is the implementation of the Panama Free Trade Agreement (FTA), which weakens the U.S. government’s ability to stop U.S. corporations and wealthy individuals from dodging taxes in Panama, one of the world’s most notorious tax havens. Passed in October 2011, the FTA is scheduled to go into effect on Wednesday.
In June 2012, the Organization for Economic Cooperation and Development (OECD), which tracks countries’ tax haven statuses, reported that Panama remains one of a handful of countries in the world that has not passed a first-stage review of its tax transparency measures. The OECD noted Panama’s nearly unparalleled nonconformity on six of nine regulatory checks against tax evasion. Even the Cayman Islands did not earn that dubious distinction.
A 2010 U.S. Tax Information Exchange Agreement with Panama, touted by the Obama administration as significantly improving Panamanian tax evasion problems, has failed to deter banking secrecy on the ground in Panama, as the recent OECD report highlighted. A large loophole in the tax treaty allows Panama to deny tax information requests about U.S. firms and citizens if revealing the information is “contrary to the public policy” of Panama, a country that earns much of its revenue by providing tax haven services.
Congress passed the Panama FTA despite opposition from two out of three House Democrats and despite U.S. public opinion polling that revealed FTA opposition as the dominant position of Democrats and Republicans alike. Since then, the U.S. government has pressured Panama to provide large U.S. pharmaceutical firms with new monopoly patent protections that increase medicine prices. Panama, however, was not required to alter its banking secrecy practices or to change its two-track tax system, which provides tax-free status to foreign corporations, nor to eliminate tax-evasion tools such as bearer share corporations, which are owned by whomever physically controls paper shares with no recording of ownership transfers required.
Panama is home to more than 400,000 corporations, many of them U.S. subsidiaries, which amounts to one corporation for every nine Panamanians. The FTA’s extreme investment and financial services provisions bar the U.S. government from limiting U.S. corporations’ transactions with Panama-based subsidiaries, while granting the subsidiaries the right to directly challenge the U.S. government in foreign tribunals for U.S. regulations to rein in tax evasion.
FTAs with Korea and Colombia were passed on the same day as the Panama pact in 2011. Since those deals went into effect, U.S. exports to Korea have declined and imports from both Korea and Colombia have surged, increasing the job-killing U.S. trade deficit.
The Obama administration’s claim that the Panama FTA “supports the President’s goal of doubling of U.S. exports to support well-paying jobs at home” repeats an identical claim made during the launch of the Korea FTA. Under that parallel deal, U.S. goods exports to Korea have fallen by more than $1.2 billion while imports have risen in comparison to 2011 levels for the same period. As a result, the U.S.-Korea trade deficit has soared by 34 percent, costing thousands of U.S. jobs. Both the Korea and Panama FTAs include provisions, borrowed from the North American Free Trade Agreement (NAFTA), that incentivize offshoring of investment. In addition to limiting how U.S. officials may combat tax dodging by U.S. firms in Panama, the FTA grants special benefits to U.S. corporations that incorporate in Panama. These offshoring incentives include a guaranteed minimum standard of treatment, compensation for regulatory costs and the ability to sue the Panamanian government in foreign tribunals if it enacts policies that undermine foreign firms’ expected future profits.
For more information about the Panama FTA, visit http://citizen.org/panama-fta.
We were astounded to learn earlier this month that a three-person ICSID tribunal has imposed on Ecuador a $1.8 billion judgment, the largest investor-state award to ever come out of the private forum. Having had a chance to look at the sovereignty-defying leaps of logic that the tribunal used to determine that Ecuador should pay the mammoth sum to U.S.-based Occidental Petroleum (Oxy), we’re even more appalled.
Oxy launched the case against Ecuador under the U.S.-Ecuador Bilateral Investment Treaty (BIT). Last week, we reported that Chevron is attempting to use this same NAFTA-style treaty to evade an $18.2 billion ruling for decades of pollution in Ecuador’s Amazon. While the second-largest U.S. oil corporation (Chevron) is using the BIT’s extreme investor-state system to run from billions in damages inflicted upon Ecuador, the fifth-largest U.S. oil corporation has just employed the same system to extract nearly two billion from the country. It seems that Big Oil has chosen private investor-state tribunals as the preferred arena in which to attack Ecuador as its preferred punching bag.
In addition to awarding $1.8 billion of Ecuador’s tax dollars to Oxy as the principal amount, the tribunal in Oxy v. Ecuador ordered Ecuador to pay $589 million in backdated compound interest, plus post-award interest and half of the costs incurred by the tribunal itself (para. 876). In sum, the tribunal handed Ecuador a penalty of at least $2.4 billion. What does $2.4 billion mean to Ecuador? That amounts to 16% of the country’s external debt and 11% of all goods exported in one year. In more human terms, the financial drain is equivalent to the combined annual income of the poorest 20% of Ecuadoreans--nearly 3 million people. Even at the average income level, the tribunal’s penalty amounts to the total income of a share of the country that’s equivalent, in U.S. terms, to the combined populations of New York and Los Angeles. Of course, it’s the Ecuadorean government who will have to figure out how to finance the $2.4 billion, which is the same amount that it spends on health care each year for over seven million Ecuadoreans-- almost half the population.
What events could have prompted such a massive judgment? In May 1999, Oxy signed a 20-year contract with Ecuador and the state oil company to explore for oil in Block 15, a segment of Ecuador’s Amazon, and extract from any discovered reserves (paras. 112, 115). In exchange for taking on all expenses, Oxy was contractually entitled to 70% of the oil produced, with Ecuador maintaining a right to the rest (para. 117). The contract also stipulated that while Oxy could sell the oil, it could not sell off any portion of its rights to produce and profit from the oil without government authorization. The contract stated that transferring the rights to the oil production without authorization “shall terminate” the contract, meaning legal annulment and forfeiture of investments (para. 119). This provision explicitly enforced Ecuador’s hydrocarbons law, which protected the government’s ability to vet companies seeking to gain control over oil production in its territory, a particular concern in the Chevron-ravaged Amazon region (para. 121).
One year after signing the contract, Oxy sought to sell off a portion of its investment in Block 15 oil production so as to gain capital and reduce expenditure risks. In October of 2000, it signed with the Alberta Energy Company (AEC, a Canadian firm) a contract in which Oxy kept “nominal legal title” to the oil production contract with the government, but AEC purchased 40% of Oxy’s oil rights and agreed to foot 40% of ongoing costs (paras. 128, 129). The two companies formed a “Management Committee” comprised of one AEC representative and one Oxy representative with the “power and duty to authorize and supervise Joint Operations” (para 136). Oxy mentioned the deal to the government, but neither presented the contract nor sought government authorization for AEC’s acquisition of a significant economic and operational stake in the Amazonian oil project (paras. 147-160).
After an audit of Oxy in 2004, Ecuador’s Attorney General determined that the confidential Oxy-AEC contract in 2000 had bypassed necessary government authorization and thus violated Oxy’s contract with the government, prompting him to initiate a process to annul it (para. 177). In May 2006, after a long delay filled with a presidential ouster and political tumult, the government terminated the contract with Oxy and repossessed the land and oil equipment of Block 15 (paras. 199, 200).
In the most recent development in the historic case against Chevron’s appalling pollution in the Amazon, the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling last week. In so doing, the Supreme Court produced yet another denial of the company’s attempt to block an $18.2 billion dollar judgment against the company in Ecuador. Chevron is trying to avoid paying the judgment that resulted from a successful lawsuit filed in Ecuador by residents of Lago Agrio in the Ecuadorian Amazon for massive contamination of the region between 1964 and 1992.
Earlier this year, the U.S. Second Circuit Court of Appeals threw out a ruling by a federal judge in New York, which had temporarily blocked enforcement of the judgment. The appellate court asserted that U.S. law does not permit “disappointed litigants in foreign cases” to ask the court to “restrain efforts to enforce those foreign judgments against them, or to preempt the courts of other countries from making their own decisions about the enforceability of such judgments.” The appellate court chastised the lower court’s attempt to block the Ecuadorean judgment, saying the move “risks disrespecting the legal system” of Ecuador and wrongly presumes that a U.S. court can act as “the definitive international arbiter of the fairness and integrity of the world’s legal systems.” The U.S. Supreme Court’s decision to not hear Chevron’s appeal suggests that they did not see a compelling reason to question the appellate court’s reasoning.
Despite having lost on the merits in the highest courts in Ecuador, and having been continually thwarted by U.S. courts in its attempts to halt enforcement, Chevron is not finished with its threat of a “lifetime of appellate and collateral litigation” to avoid complying with the judgment. The company is using the extreme foreign investor rights in the U.S.-Ecuador Bilateral Investment Treaty (BIT) to continue its campaign to evade justice via an "investor-state" case to be decided by an ad hoc tribunal of three private lawyers.
This is not the only instance of corporations using international trade and investment pacts to bypass the justice system of sovereign nations. In August, the Australian High Court (equivalent to the U.S. Supreme Court) upheld the country’s landmark “plain packaging” laws against an attack from Big Tobacco. Despite this, Australia’s landmark tobacco control law remains under threat as Big Tobacco company Philip Morris is challenging the law under the Hong Kong-Australia BIT. The U.S. company incorporated a subsidiary in Hong Kong in order to launch the attack.
The details of the cases are different - the Australian High Court ruled to uphold its law on the merits of the case, while the U.S. Supreme Court refused to hear Chevron’s appeal of a lower court ruling. However, in both instances, deep-pocketed corporations are using trade and investment pacts to bypass and belittle the highest courts, even in countries with highly respected and independent judiciaries.
Under the investor-state dispute settlement system enshrined in U.S. Free Trade Agreements (FTAs) and BITs, private tribunals have awarded more than $2.5 billion in taxpayer compensation to corporations to compensate them for “lost profits.” Despite such damage, these same rules are being expanded through the Trans-Pacific Partnership (TPP). A leaked investment chapter from the TPP reveals that the pact would require all TPP countries, including the United States, to allow foreign investors to launch investor-state attacks on their governments, to be decided by unaccountable foreign tribunals. Understandably, Australia has so far refused to be subjected to the investor-state dispute settlement in the TPP, but the U.S. is still pushing TPP negotiating countries to put investor "rights" before their own public interests.
The conclusion of the Chevron case is being closely monitored, and will have consequences beyond Lago Agrio. Reuters reports that “oil companies are watching the case closely because it may affect other cases accusing companies of polluting the areas where they operate.” If Chevron is successful in its attempts to avoid paying damages for egregious pollution, other companies will have affirmation that they have a chance to circumvent responsibility for environmental destruction by using the extreme investor-state system.
Al Jazeera Asks: Will Colombia's Protesting Workers Be Heard?
This week, as we mark 100 days since the implementation of the Colombia-U.S. Free Trade Agreement, volatile protests against General Motors indicate that working conditions have not improved for Colombian workers. Colombia remains the most dangerous place in the world for union organizers, and seven union leaders have been killed this year.
Watch Al-Jazeera's video on the GM workers, who have stictched their mouths shut in a hunger strike, here.
The Trans-Pacific Partnership (TPP) Investment Chapter that leaked last week has been making waves. Trade scholars, talking heads, citizens and politicians are all discussing the ramifications of this chapter, which outlines the process that multinational corporations can use to sue governments that enact laws to protect public health, workers’ rights, and the environment.
The leak of this secretive chapter has amplified the voices of bipartisan congressmen and numerous civil society organizations who have long been demanding transparency in the TPP negotiations. Huffington Post ran an article which opened on the front page and has drawn a record number of reader comments- 29,959 to date. The text of the article cites the list of calamitous effects the TPP Investment Chapter could have, including raising the cost of vital medicines and effectively ending “Buy American” preferences for domestic manufacturers. Global Trade Watch Director Lori Wallach warned that "the outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of [trade] negotiations."
The progressive online magazine Salon ran a story warning its readers that TPP could grow “bigger than NAFTA.” Other articles have also appeared in a variety of domestic and international outlets, including RT (which also interviewed our own Todd Tucker), Inside US Trade, The New Zealand Herald, Law360, the Santiago Times and the International Economic Law and Policy Blog, among others.
Wallach has also discussed the leak on numerous radio and television programs. On the news show “Democracy Now,” Lori spoke with Amy Goodman and Juan González about the dangers of TPP as “a 'one-percenter' power tool that could rip up our basic needs and rights." She also appeared on numerous other TV and radio outlets, including the Viewpoint with Elliot Spitzer on CurrentTV, Let’s Talk About It Radio, Pacifica Radio, CounterSpin, the Dave Sirota Show, the Nicole Sandler Show, Stand UP! With Pete and Dominic, the Bill Press Show, and Sly in the Morning.
The leak has incited extremely significant dialogue, especially in Australia, which according to the leaked document would be the only TPP nation exempt from the Chapter’s provisions on investor-state tribunals.
Providing the public with access to the TPP Investment Chapter is a significant beginning step towards unearthing the secrets of the TPP negotiations and promoting awareness of the powers it bestows upon corporations at the expense of the citizens of America and the eight other TPP nations. (Or eleven, if you include this week's announcements that Canada and Mexico would join the talks.) The more exposure this document receives, the more pressure can be put upon negotiators to live up their promises of transparency.
Thanks to Jed Silver for contributing to this post.
It is oddly fitting that U.S. Trade Representative (USTR) Ron Kirk would celebrate today’s implementation of the U.S.-Colombia trade deal at the U.S. Chamber of Commerce. After all, even as the U.S. government’s own projections showed that this pact and a similar one with Korea would increase the U.S. trade deficit, both USTR and the Chamber worked overtime to misrepresent this and other likely impacts.
The failed North American Free Trade Agreement has virtually identical rules as the Colombia pact, and we know how that worked out: increased job insecurity and more corporate attacks on public interest policies outside of national judicial systems. These rules weren’t a good idea when it came to Mexico: they’re even worse when it comes to Colombia.
In October, President Obama set a new low by pushing a controversial U.S.-Colombia trade deal that attracted the highest level of Democratic opposition to a Democratic president’s trade initiative in history. Instead, record high levels of Republican support were marshaled, only because the Tea Party-supported members of Congress flip-flopped on their campaign commitments by voting for a trade deal that undermines American jobs and sovereignty.
If the administration continues the course on the failed trade policies of the Bush-Clinton-Bush years (as it seems to be with the nine-nation Trans-Pacific Partnership), it can expect continued outrage from people across the political spectrum.
By crossing public information on (a) the “supervision” inspections conducted by the Supervisory Body for Forest Resources and Wildlife (OSINFOR for its Spanish initials) on a series of timber concessions with (b) the documentation for CITES export permits for cedar and mahogany, EIA identified more than 100 shipments containing illegally logged CITES wood that were exported to the US between January 2008 and May 2010 – that is, more than 35% of all such shipments with CITES permits that left Peru for the US during this period.
Peru’s primary exporter, Maderera Bozovich, exported shipments under 152 CITES permits during this time, at least 45% of which included wood of illegal origin. It is likely that more supervisions in the field would discover that these percentages are actually higher.
(v) Providing to a government official, or receiving as a government official, compensation, whether monetary or in kind, in exchange for particular action taken in the course of that official’s enforcement of Peru’s laws, regulations and other measures relating to the harvest of, and trade in, timber products."
While there is no statistical evidence that trade in endangered timber has increased, or that deforestation has increased, EIA is concerned (as I understand it) that the lack of accountability represented by the forged documents that do not line up to the actual origin of the trees sold and exported from 2008-10 could be an indication of deeper forestry abuses beneath the statistical surface or down the line. They're calling on the Obama administration to audit Peru's forestry practices, as a first step that could lead to actual retaliation under the FTA.
The FTA has been a fundamentally disruptive force in Peruvian life, disrupting presidential elections and now offering U.S. multinationals with tools to evade justice and environmental clean-up responsibilities. See this excellent report by the Sunlight Foundation's Keenan Steiner for more on this latter point, which makes mention of our March 2012 report on a recent so-called investor-state case under the U.S.-Peru FTA. The Obama administration is set to lock in and expand these rules under the Trans-Pacific Partnership trade deal, which both Peru and the US are in and which is also supported by presumptive GOP candidate Mitt Romney.
The significance of the EIA reports (you can check out EIA's 2010 study on the same topic) is that the best part of the FTA (the forestry sector annex) is delivering more information and attention to forestry, but has not yet led to fundamental change on the ground. To deliver that change, we'll have to see actual enforcement. Now, the ball's in Obama's (or Romney's) court. Will they deliver?
A couple of weeks ago we reported about Senator Wyden's lively exchange with U.S. Trade Representative Ron Kirk regarding transparency in the Trans-Pacific Partnership Free Trade Agreement (TPP).
Senator Wyden has now increased pressure on USTR by filing a legislative amendment for more transparency in the TPP negotiations related to intellectual property and the internet. Our colleagues at KEI posted a short blog about the amendment.
Last night, the Office of the U.S. Trade Representative (USTR) released its hefty, annual Trade Policy Agenda and Annual Report. This statutorily mandated annual tome offers a good opportunity for Congress and the public to understand what USTR thinks it's doing, or what the agency wants us to think it's doing.
Unfortunately, the Trade Policy Agenda is (once again) an exercise in sugar-coating so extreme that it's surprising it got past Michelle Obama's nutrition advisers.
Trade without a net (calculation). As we've detailed on this blog many times over (see here and here), one of the administration's biggest sins in its recent push for the Korea and Colombia trade deals was its claim that these deals would boost bilateral exports by $12 billion, without noting that the government's own numbers project that the deals will increase job-displacing imports more than job-creating exports. In other words, these deals are projected to be a net negative for job creating exports. We were kinda hoping that the administration might stop misrepresenting its own research once they got Congress to pass these deals. But this seems to be a case of repeating the same incorrect line so many times that you start to believe it's true.
American-made smoke and mirrors. The very first page of the Trade Agenda mentions the "Made in America" theme twice. But USTR is actually pushing the exact opposite of Made in America. Not only have our trade deals meant that imports of products Made-Overseas swamp exports of products Made-in-America, but these pacts also require that the U.S. roll back Buy American requirements for our trading partners. In fact, today, the morning after the Trade Agenda touting Made in America was published, USTR issued a determination stating that Korean-made products will be treated as if they were American for U.S. government procurement purposes.
Korea deal hurts U.S. auto sector. Everyone loves to love on the auto sector these days, and the Trade Agenda paints the Korea deal as a boon to Detroit. But once again, the government's actual numbers show that Korean auto imports will outstrip U.S. auto exports under the deal. Moreover, the harebrained (and high profile in Korea) exemption of U.S. autos from having to meet Korean auto safety and environmental standards will read like a "Do Not Buy American cars for your teen" label to every concerned Korean mother and father.
Working hard to export less. Significant USTR resources are being expended on the Trans-Pacific Partnership (TPP). The Trade Agenda touts U.S. exports to the eight TPP nations (supposedly to point out how awesome the deal will be for U.S. exports), but fails to mention that USTR already put FTAs in place with the four most significant nations on the list (Peru, Chile, Singapore and Australia). Oops.
There were some interesting press hits over the weekend from Reuters' Alison Frankel, Adam Klasfeld, and AFP about the recent investor-state arbitral ruling against Ecuador.
Chevron counsel Randy Mastro of Gibson, Dunn & Crutcher said suggestions that the Republic should ignore the arbitrators' instruction are absurd. "Any country ignoring the ruling of an arbitration panel would be doing so at its peril," he said. Chevron's underlying claim in this arbitration, he pointed out, is for a judgment that under an old agreement with Chevron predecessor Texaco, the Republic of Ecuador is responsible for bearing all the costs associated with cleanup of the Lago Agrio region -- including Chevron's liability to the Ecuadorean plaintiffs. With that part of the arbitration pending, the Republic would be risking an adverse result if it flouted the panel's interim order.
"Typically, nations with treaty obligations honor those obligations or face the consequences," Mastro said.
This raises an interesting question, which a colleague asked me: “Are there any penalties written in the treaty if Ecuador disobeys the ruling?"
What if a country refuses to see itself as bound? What then?
Well, the BIT also says that all arbitrations “shall be held in a state that is a party to the New York Convention.” This creates a backdoor enforcement regime. When an arbitral tribunal orders a cash payment, a claimant can take the arbitral award to the national court of any signatory to the New York Convention (1958). This is about every country.
The situation is considerably murkier in the Chevron case, and there are not many (if any) precedents for non-cash related awards.
Chevron's counsel argues that Ecuador risks an adverse ruling in the "final award" if it flounts the interim measures award. (Interestingly, Veeder, Lowe and Grigera Naon have not even found that they have jurisdiction over the case, but assumed they did for the sake of making this injunction-like interim award.) I see a few problems with that argument. First, it's possible that there could never be a "final award." Second, if Ecuador already denounced the interim award, what would keep them from denouncing the final award?
Chevron could argue that capital will dry up. This argument states that capital markets would refuse to lend to a country that didn’t “play by the rules.” Indeed, Argentina has had difficulty accessing international capital markets since its default and subsequent refusal to enter bond markets. However, this has not mattered since Argentina has strong internal capital markets, export markets and has been growing like gangbusters. My bet is that Ecuador (certainly under Correa) would not find this threat super credible either, although it could definitely make the government's life uncomfortable.
Chevron could pressure U.S. to take foreign policy action. More recently, Obama has tried to pressure Argentina to comply with investor state rulings by voting against disbursements for Argentina in the Inter-American Development Bank. Congress may attach riders to appropriations for Argentina to pressure them to comply. This could hurt Ecuador, but the country also has been on the outs in trade preference legislation already.
Chevron could press for war. In an earlier era of gunboat diplomacy, countries that didn’t “play by the rules” received a visit from the US or UK Armed Forces.
Although some of these sound absurd, they are options for "enforcing international law."
Since we don't know how that case will end up, it's hard to know how a second one could end up in Chevron v. Ecuador Part Deux, nor what if any consequence it could have on an adverse investor-state ruling. But it seems things will stay interesting in this case for a while to come.
UPDATE: Bottom line: Ecuador is stuck between a rock and a hard place. If the government complies with the investor-state ruling and therefore breaks its own Constitution, it risks revolution at home. If it ignores the investor-state ruling, it allows Chevron to continue its global campaign to isolate Ecuador in international capital markets and politics. Chevron would probably ultimately try to enforce a cash arbitral award in third country courts. I'm betting that the plaintiffs would, in this case, also try to enforce the Ecuadoran court ruling in third country courts. Essentially, compliance puts Ecuador on a constitutionally tainted collision course with its citizenry; non-compliance puts the investor-state system on a geopolitically tainted collision course with justice for the plaintiffs. Either situation is unprecedented.
Will Chevron Case Take Down Trade Pact ‘Investor-State’ Enforcement System?
WASHINGTON, D.C. – An unprecedented ruling, in which an investor-state international arbitral tribunal initiated by Chevron ordered the Ecuadorian government to interfere in the operations of Ecuador’s independent court system on behalf of the oil giant, provides a chilling glimpse of how corporations are trying to use international investor tribunals to evade justice, said Public Citizen.
After having lost on the merits in Ecuador and U.S. courts and after 18 years of trying to stall judgment, Chevron turned to an ad hoc “investor-state” tribunal of three private lawyers as the last chance to help the company avoid paying to clean up contamination in the Amazonian rainforest. Chevron is trying to get this private tribunal to suspend enforcement of or alter an $18 billion judgment against Chevron rendered by a sovereign country’s court system.
The tribunal issued a ruling yesterday even though it has not even determined that it has jurisdiction over the case. Past such international investor cases in which tribunals have ordered governments to pay cash damages to corporations have led to growing controversy.
“The Ecuadorian government should not violate its own constitution and interfere with its independent courts’ order for Chevron to clean up its horrific contamination in the Amazon, because some unelected ad hoc tribunal of three private sector lawyers called together by Chevron to meet in a rented room in Washington, D.C., pretends to have the authority to second-guess 18 years of U.S. and Ecuadorian court rulings,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.
“Consider the broader implications of this star chamber ‘investor-state’ system: How can a panel of three unelected private sector lawyers order a sovereign government to violate its own constitution’s separation of powers and interfere in its court system, all to help Chevron (a company whose severe contamination of the Ecuadorian Amazon has been repeatedly proven), and how can that tribunal do this all before it has even decided that it has jurisdiction over this case,” Wallach said.
Meanwhile, the three private-sector lawyers serving as tribunalists on this kangaroo court will continue to rack up large hourly fees even as they order Ecuador’s government to help Chevron deny justice to the 30,000 Amazonian indigenous people who have won a historic $18 billion clean-up of deadly environmental contamination. Tribunalists in this system, who alternate between serving as “judges” and representing corporations in cases before panels of their colleagues, are paid on an hourly basis.
“The only silver lining of this obscene ruling is that having one of these shady investor-state tribunals presume to attack a country’s constitution, justice system and 30,000 people whose futures rely on Chevron cleaning up its mess could lead to the implosion of the entire investor-state system, which international companies are increasingly using to try to evade justice worldwide,” said Wallach.
These unaccountable investor-state tribunals have issued perverse rulings in the past on behalf of corporate claimants. Recent U.S. trade agreements empower foreign corporations to use this system to skirt our domestic courts and directly use our government before these corporate tribunals to obtain payment of unlimited taxpayer funds when they claim domestic environmental, land use, health and other laws undermine their “expected future profits.” More than $350 million has been paid by government to corporations in attacks on toxics bans, environmental issues and zoning permits under the North American Free Trade Agreement (NAFTA.) Billions in additional claims are pending. Possible inclusion of the investor-state private enforcement system for corporations to sue governments is becoming one of the most controversial issues in the first “trade” deal the Obama administration is negotiating – a new Trans-Pacific Partnership trade deal.
Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, visit www.citizen.org.
During last week's events on the Chevron v. Ecuador investor-state case, someone asked an interesting question: say the Ecuadoran domestic ruling for the plaintiffs (who allege harm from environmental contamination by Texaco, now Chevron) stands. Say their legal team moves to attempt to enforce that ruling in other courts (say courts in Venezuela, where Chevron has some assets). How would a U.S. court treat the Ecuadoran or Venezuelan ruling?
The U.S. (along with Ecuador and Venezuela) is party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). An investor-state arbitral award anywhere in the world can be enforced in the U.S. with respect to assets of the respondent located in the U.S., which is considered a “secondary jurisdiction” under U.S. court interpretations of the Convention.
In 1985, the U.S. Supreme Court put its stamp of approval on the enforcement of arbitral awards. This appeared to be motivated in part by a desire to avoid losing some of this “business” to France and the UK. (For a fascinating history of this, see this book by Yves Dezalay and Bryant Garth.) As the court wrote in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc.: “[C]oncerns of international comity, respect for the capacities of foreign and transnational tribunals, and sensitivity to the need of the international commercial system for predictability in the resolution of disputes require that we enforce ... agreement[s]” to submit disputes to binding international arbitration.
However, most foreign court rulings (like the Ecuadoran ruling) will have difficulty being enforced in the U.S. The U.S. (along with almost every other country in the world) is not party to the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters, which would have set up an international framework for this.
This stuff gets very complicated. Take a recent case in U.S. federal courts, KBC v. Pertamina. KBC was a Cayman company that had a contractual relationship with Pertamina, an Indonesia state owned enterprise. They agreed to arbitrate if they ran into problems, on Indonesian territory under UNCITRAL rules. On December 18, 2000, the arbitral panel issued a final decision awarding KBC more than $261 million in damages, lost profits, and costs of arbitration.
Pertamina asked for Swiss courts to overturn the award, which they did not do.
KBC, for its part, asked a Texas federal court to enforce the judgment. Pertamina appealed, but refused to post a bond. KBC then took it to New York court. Both courts upheld the arbitral award, on the basis of comity and the 1985 Mitsubishi precedent.
But then Pertamina launched a case in Cayman courts, arguing that the whole dispute was fraudulent. KBC then asked U.S. courts to enjoin the Cayman action, which they did, this time without referencing comity, but instead the need to uphold the New York Convention.
The case shows that an arbitral award in favor of Chevron is going to be given much more weight in U.S. courts than an Ecuadoran (or Venezuelan) court ruling in favor of the Ecuadoran plaintiffs.
I’m sure there’s a lot more legal complexity than what I’m capturing here in this quick review, but the comity doctrine seems to be among the most elastic on the books.
Moreover, the recent ruling in Donziger v. Chevron in the NY courts shows that U.S. judges were pretty unwilling to treat their Ecuadoran counterparts as equal. In a March 2011 ruling, Judge Lewis Kaplan wrote "that Ecuador has not provided impartial tribunals or procedures compatible with due process of law." While this was vacated in September, it definitely gives a flavor of what might go down.
In the 16 months leading up to the congressional vote on a set of trade deal with Korea, Colombia and Panama in mid-October, new reporting on the agreements scarcely mentioned that critics existed; when they were acknowledged, their objections were frequently mischaracterized. With media doing little to evaluate misleading claims made by the trade pacts' proponents, all three were approved by Congress by considerable margins.
There were two major points that opponents of the trio of deals – including labor, environmental, consumer and even Tea Party groups – consistently emphasized in reports, press releases, letters and direct outreach to reporters.
First, these trade deals were modeled on the controversial North American Free Trade Agreement (NAFTA), a pact whose actual content reporters have historically paid little attention to (Extra!, 11-12/97). The combined text of the three new deals was nearly 4,000 pages; as with NAFTA, the bulk of the provisions were not related to "trade" issues per se, but rather restrict how the U.S. and the other nations might regulate their domestic economies. For instance, corporations are given new rights to challenge environmental and other regulations outside of national court systems, and demand that taxpayers compensate them for regulations' potential impact on profits.
Second, unlike earlier trade deals, even the government's own projections showed that the pacts would increase the U.S. trade deficit (Extra!, 10/11). The projections were produced by the independent U.S. International Trade Commission (ITC), which typically produces overly rosy estimates of trade deals' impacts.
But at two of the country's most prominent papers, the New York Times and the Wall Street Journal, such criticisms were almost entirely absent.
The full article is available by subscription.
As trade negotiators from the U.S. and eight other Pacific Rim countries met in Lima, Peru this week for Trans-Pacific Free Trade Agreement (FTA) talks, Peruvian and global activists criticized the continued secrecy of the talks and the public health implications of recently leaked texts on drug patents and pharmaceutical pricing.
Read Public Citizen's statement about the dangers of the leaked U.S. proposals.
And here's some television coverage from a leading Peruvian news network of a civil society rally outside the hotel where talks are taking place, featuring some of our Peruvian and international allies.
It's typically treated as pretty newsworthy when a majority of a president's own party votes against a signature presidential initiative. Double that when over two-thirds do so. Triple the newsworthiness when it's the first time that magnitude of opposition has occured in a president's tenure.
Quadruple for when talking heads are debating whether elected officials will carry the banner of a wide-ranging new progressive protest movement that has declared its independence from that same president. And quintuple when the president has presented a two-plank carrot-stick deal with Republicans - controversial trade deals that won't create jobs plus stimulus spending that will - and when the Republicans move forward with the job-killing plank. But the job-creating plank? Not so much.
This describes precisely what happened with last night's votes to expand NAFTA-style deals to Korea, Colombia and Panama. But you wouldn't know it from any of this morning's press coverage of the vote, which lauded the "bipartisanship" of a deal that was supported by only a tiny cohort of corporate Democrats.
"Today a larger share of House Democrats voted against a Democratic president on trade than ever before. It took Bill Clinton nearly eight years of NAFTA job losses, sell outs and scandals to have (not even) two-thirds of the House Democrats vote against him on trade."
Obama managed to do the same in three, getting Democratic opposition nearly 20 percentage points higher than Clinton ever did.Over 82 percent of Democrats opposed the Colombia FTA, while over two-thirds opposed the Korea FTA and over 64 percent opposed the Panama FTA. Even a majority of the New Democrats - the most pro-NAFTA grouping in the party - opposed. These percentages go well beyond the previous high-water mark of House Dem revolt from the president (the February vote on the Patriot Act).
Why were Dems so opposed? The deals won't do anything to help the jobs crisis, and could make things worse. On top of that, they contain hundreds of pages of non-trade provisions that put obstacles in the way of re-regulation of Wall Street and environmental protection. Rep. Mike Michaud (D-Maine), a leading Blue Dog, lays out the analysis in this compelling speech that takes the White House to task.
Democrats' declaration of independence wasn't the only thing that was missed in the coverage. The media also missed the storyline of the Tea Party's abandoning of its principles. Candidate Rand Paul, for instance, railed against the WTO as as an intrusion on U.S. sovereignty. Countless House Tea Party candidates ran paid ads attacking job offshoring, helping them make key inroads among working class voters. Yet virtually the entirety of the Tea Party backed candidates sided with the president for job offshoring deals.
Indeed, there has always been several dozen Republicans who could be counted on to vote against unfair trade policy - even in super-close votes like Bush's push in 2005 for CAFTA, which passed by two votes. Fast forward to 2011, when ONLY SIX Republicans voted against the Panama FTA. This is a historic shift for a party who has always had a more trade-skeptical segment going back centuries.
These political shifts are likely to have major consequences in the upcoming elections. Many Democrats have - like the movement on the streets - declared their political independence. Will it be enough to make up for being down-ticket from a president who flip-flopped on his own campaign pledges to overhaul U.S. trade policy? The world will be watching.
Follow us on Twitter @pcgtw.Going on now!
Also, check out Fairness and Accuracy in Reporting's take on the press coverage around the FTAs, and Glenn Hurowitz over at HuffPost on the awful political calculus the adminstration made by taking up these deals.
As part of the corporate ad campaign to push congressional passage of the NAFTA-style trade deals with Korea, Colombia, and Panama, the heads of 32 corporations placed an "open letter" in yesterday's National Journal Daily (subscription only). Thing is, many of these very corporations are certified by the U.S. government as having offshored thousands of jobs under past U.S. trade agreements. That's right, the advertisement claiming that these Bush-era FTAs are needed to create U.S. jobs is sponsored by many chronic trade-agreement offshorers of, um, U.S. jobs.
Moreover, while these CEOs claimed that these deals would create U.S. jobs, the government’s own official studies predict an increase in the U.S. trade deficit from the deals. And, an independent economist projected the net loss of hundreds of thousands of jobs from the pacts. The historical record of similar trade agreements is that the United States has slower export growth to countries we have NAFTA-style deals with than with other countries.
We have a searchable form of the TAA database on our website. There you can see that some of these 32 corporations have shipped a combined 18,600 American jobs overseas since 2001. Consider that an example rather than a full accounting of the damage, as TAA is a narrow program that excludes many workers who may well have lost their jobs to trade pacts and imports but who do not meet the program's criteria. If a broader range of trade-related job loss is utilized, the Department of Labor reports over 35,000 workers who have lost their jobs at these companies due to trade since 2001.
Just to pick out a few examples, Whirlpool took advantage of NAFTA and shipped over 1,000 jobs at their Fort Smith, Arkansas facility to Mexico in 2008. Caterpillar, a major backer of the proposed trade pact with Colombia, laid off 338 workers at its Mapleton, Illinois facility when it shifted their work to Mexico. And it looks like Texas Instruments was getting a head-start on the offshoring possibilities offered by the Korea trade deal when it shipped 149 jobs at its Attleboro, Massachusetts facility to South Korea, Mexico, and China in 2005. It just so happens that electronics is going to be the hardest-hit sector in terms of the ballooning deficit from the Korea pact, so the remaining Texas Instruments workers in the United States should be wary.
This ad came the day of Obama's big jobs speech, and it turned out that he slipped in one definitely anti-jobs pitch, advocating for the passage of the Korea, Colombia, and Panama pacts. (Although this time, unlike in the State of the Union address, he did not make the dubious "70,000 jobs supported" claim.) If this isn't bad enough, Larry Summers, Obama's former director National Economic Council, last month argued that "We should not oppose offshoring or outsourcing."
Let's increase our competitiveness... the reality is about half of our imports, our trade deficit is because of how much oil [we import], so you take that out of the equation, you look at what percentage of it are things that frankly, we don't want to make in America, you know, cheaper products, low-skill jobs that frankly college kids that are graduating from, you know, UC Cal and Hastings [don't want], but what we do want is to capture those next generation jobs and build on our investments in our young people, our education infrastructure. Our advanced services like [at the architecture firm where we met], there's no reason in the world ... why would we not want to capture the economic benefit of that here in America? I mean, I would argue that that is exactly the reason that we're doing it.
The Korea trade deal, projected to result in the loss of 159,000 U.S. jobs, will not just displace workers in the apparel industry, however. The Korea FTA will increase the U.S. deficit in cutting-edge industries, including electronics and motor vehicles, costing us even the "next generation" jobs that Kirk extolls. The Korea, Colombia, and Panama trade deals clearly endanger President Obama's job creation agenda, and USTR Ron Kirk should go back to the drawing board to formulate a trade policy that creates jobs instead of one that eliminates them.
Last month, the Brookings Institution published a policy brief advocating for the passage of the Korea, Colombia and Panama trade deals (or FTAs). The policy brief contains little in the way of new research, but it certainly quotes existing research in a selective way.
Like the Obama administration, the policy brief incorrectly cites the U.S. International Trade Commission's (USITC) predictions for the change in exports to Colombia under the Colombia FTA as the increase in U.S. exports ($1,060 million), rather that prediction for the change in total U.S. exports under the FTA ($654 million). Moreover, the brief does not discuss the jobs implications of the fact that U.S. imports will increase more than exports under the Korea and Colombia trade deals. Since imports will increase more than exports, net job losses will likely result.
GDP here is defined as nominal GDP, which takes into account both the price and quantity changes of its components. Welfare, on the other hand, summarizes the real (i.e., exclusive of price effects) value of present and deferred consumption....Increases in the prices of consumption or investment will lead to an increase in GDP, but not in welfare.
In plain English, this means that the $12 billion figure cited in the policy brief is not the change in the quantity of goods and services produced by the U.S. economy. Rather, a separate measure called welfare represents this change in the real value of the economy that actually matters to businesses. Browsing through the tables (specifically, Table 2.1) in the report reveals that the USITC's estimate of the real increase in GDP under the Korea FTA is only $1.8-2.1 billion. Real GDP under the Colombia FTA is expected to increase by $419 million.
So, the predicted increase in GDP is smaller than claimed, but there's still an increase, and therefore we benefit, right? The truth is that the small predicted real GDP gains under the FTAs will not be enjoyed equally by everyone. The big economic issue with FTAs is that some of them may boost overall GDP slightly, but the gains go almost exclusively to corporations and those Americans who already have a lot of wealth. Meanwhile, the adjustment costs fall upon the middle and working classes, leading to net losses for them. Incidentally, the USITC's model simply assumes that adjustment costs don't exist. This distributional issue in trade policy is critical. Josh Bivens at EPI estimates that trade flows have increased income inequality in the U.S. by 7 percent, costing an average household $2,000 per year.
The policy brief also repeatedly claims that the U.S. is losing market share in Asia to its competitors. It argues that the Korea FTA will reverse this "trend." This claim has scant evidence to back it up. As we pointed out in our latest Trade-ifact, U.S. exports to the Pacific region have grown 35 percent since 2005, while overall U.S. exports to the world have grown at a slower rate, 25 percent, over the same period. And without FTAs the United States continues to edge out competitors, increasing its market share in most of the major Asian economies since 2005, including South Korea.
In a claim about the "benefits" of the Colombia FTA, the authors of the policy brief seem uninformed about the realities of Colombia’s rural economy. They write, "[The Colombia FTA] supports U.S. goals of helping Colombia reduce cocaine production by creating alternative economic opportunities for farmers." However, the Colombian Ministry of Agriculture and Rural Affairs conducted a study of the effects of an FTA with the U.S. upon nine primary agricultural products and found that full liberalization would lead to a 35 percent decrease in employment in those sectors (see pages 162-163 of the study). The study said that with an FTA without agricultural protections, rural Colombians “would have no more than three options: migration to the cities or to other countries (especially the United States), working in drug cultivation zones, or affiliating with illegal armed groups” (pg. 180). Thus, contrary to the claims of the policy brief, all evidence indicates that the FTA would reduce agricultural opportunities for farmers, possibly increasing cocaine production.
A new reporting and video series has been launched by Zach Carter and company over at the Huffington Post that will explore how the Korea trade deal will benefit the North Korean dictatorship.
In 2004, Hyundai inked one of the best land deals in history. For a mere $12 million, the South Korean car company secured the rights to 50 years of use on over 41,000 square miles of industrial space -- $292 per square mile, only about 10 percent higher than the rate the U.S. paid France under the Louisiana Purchase.
For a manufacturing giant, the Hyundai deal was a dream: plenty of space for factories, room for worker housing and a population that would work for less than half the wages that Hyundai was accustomed to paying for labor in its Chinese factories.
Products made In this sweatshop, finds Carter, can be incorporated into goods assembled in South Korea, and then shipped to the U.S. duty-free under the U.S.-South Korea trade deal. If the U.S. attempted to block it, South Korea could use trade pact rights to challenge the U.S.
Future installments will look at tax haven abuses in Panama and labor murders in Colombia, and how the package of three trade deals being pushed by the administration could make these matters worse.

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