Tea Party, Progressives unite on fast-track trade authority

As White House pressures Congress for fast-track trade authority, Tea Party and Progressives unite in opposition Photo: AP Photo

WASHINGTON, November 13, 2013 — With the Tea Party coming out hard against President Obama’s trade agenda, there may be some synergy among conservatives and progressives in tackling this year’s hottest transnational conflict.

Outspoken critic of the Obama trade agenda and Washington Times Communities columnist, former Rep. Allen West, R-Fla., told Politico this week that there’s “a reason to wonder what is really going on behind the doors there, especially when there is no congressional oversight.”   


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The main sticking point for West and the rest of the Tea Party is the Obama Administration’s request for fast-track negotiating authority, also known as trade promotion authority. According to Politico, Phyllis Schlafly, founder of the conservative advocacy group Eagle Forum, noted this week, that if fast-track is approved, “the House cedes to the president its constitutional power to write legislation that regulates commerce with foreign nations.” She is right. 

Obama’s fast-track freedom would be used to enact the U.S.-E.U. Transatlantic Trade and Investment Partnership (TTIP) and the Trans-Pacific Partnership (TPP), which include the economies that make up the majority of the world’s global domestic product and are plagued by oversight and accountability issues.  

This is where progressive opposition comes in, as the vulnerable communities that will be impacted are wide-ranging, spanning the environmental, labor and health sectors.

Starting with what’s arguably the most troubling, since the discussions are happening fast and furiously (TTIP is already underway and the administration’s final terms on the TPP remain secret). Beyond the disembowelment of environmental and labor standards, there’s a larger issue that remains out of the spotlight. It is the plan for extrajudicial “investor-state” tribunals as the final arbiter on trade disputes.


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Progressive Democrats and conservative Republicans alike should be concerned with the sovereignty issues here. As Huffington Post’s Zach Carter explains it, “Foreign corporations operating within the U.S. would be permitted to appeal key American legal or regulatory rulings to an international tribunal. That international tribunal would be granted the power to overrule American law.” Furthermore, the tribunals could order taxpayer compensation for health and environmental policies that inhibit foreign investors’ “expected future profits”.

This is hardly good for America, which is why there should be bipartisan concern. Here is what it looks like in practice. Let’s say a Japanese company wants to do some business in California. But a state law fashioned in Sacramento prohibits or puts limits on parts of the Japanese firm’s operations, due to local environmental standards. (A company only needs to be operating in, not based in, a TPP country to use the regime.)

California, in response, a leader nationally on environmental protection, sticks to its standards and enforces its laws. The Japanese firm counters by taking California to one of these extrajudicial TPP trade “courts”. Except in this case, the court “judges” are not part of a more reputable international tribunal based in an international institution on par with United Nations or the International Criminal Court. No, in this case, the judges are often private sector lawyers that “rotate between acting as ‘judges’ and as advocates for the investors suing the governments”.

Now, if the company wins the suit, the settlement, which is often in the tens of millions and occasionally in the billions of dollars, is paid by the “losing” country’s taxpayers. Keep in mind that companies won these lawsuits 70 percent of the time last year. Even when governments win, they have to shell out $8 million on average per case just to defend existing public interest policies.

The three cases below are exemplary of what we’re dealing with under current trade agreements, and what we’ll likely see more of with TPP and TTIP.

Take a look at the first case. Under U.S.-Ecuador’s Bilateral Investment Treaty, which mimics the investor-state system enshrined in the North American Free Trade Agreement (NAFTA), the largest ever reward from one of these tribunals has hit the poor country of Ecuador hard. In a decision by a World Bank tribunal last year, Ecuador lost to Occidental Petroleum and now is being forced to pay a penalty of $2.4 billion for ending their oil contract. Ecuador, reeling from decades of environmental pollution by Chevron/Texaco in the Ecuadorean Amazon, had concerns with Occidental illegally selling off portions of the agreed-upon oil contract without government authorization, a move that abrogated the contract. Now the country is billions in debt.

The second case involving Peru and a company called Renco Group Inc. and its subsidiary Doe Run Peru, owned by U.S. billionaire Ira Rennert, is equally disconcerting. Pollution from the company’s lead and zinc smelters, which are operated in the mountain town of La Oroya, was linked with high lead levels in the town’s children. After myriad cases emerged of mental retardation, convulsions, anemia, and stunted growth, Peru ordered an environmental cleanup, to which Renco responded by launching an $800 million claim against the government under the U.S.-Peru Free Trade Agreement. The company claimed that the cleanup ran Doe Run Peru into bankruptcy. Meanwhile, the kids get sicker and the town poorer.

The third case involves a fight over hydraulic fracturing, or fracking. After Quebec passed a moratorium on fracking two years ago because it wanted to conduct an environmental impact assessment on the impacts of leached chemicals and gases from fracking, U.S.-based company Lone Pine Resources demanded $250 million saying Canada violated its NAFTA obligations. The company had planned to frack 30,000 acres near the St. Lawrence River, injecting toxic chemicals into a critical watershed. These kinds of cases where a nation’s laws are usurped by extrajudicial tribunals are only becoming more common.

What’s remarkable is that President Obama was against this just a few years ago: According to Barack Obama on the campaign trail, “We will not negotiate bilateral trade agreements that stop the government from protecting the environment, food safety, or the health of its citizens; give greater rights to foreign investors than to U.S. investors; require the privatization of our vital public services; or prevent developing country governments from adopting humanitarian licensing policies to improve access to life-saving medications.”

Despite the about-face, President Obama and U.S. Trade Representative Michael Froman remain undeterred in asking Congress for fast-track authority to move forward these investor-state provisions within any forthcoming trade agreements. Thankfully, two-thirds of the Democratic freshman class in the House of Representatives have already opposed it.

What’s needed going forward, then, on both TPP and TTIP, is more oversight and accountability by both Congress and the constituents they represent. The overwhelming majority of the trade advisory boards are stacked with private sector representatives with little nongovernmental participation.

If these trade deals are the “win” that the White House claims, then there should be no reservations whatsoever in opening up the process for full participation by the stakeholders who will be at the receiving end of these trade agreements. That would make it truly trans-Pacific or trans-Atlantic. And that would make it a real partnership.


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Michael Shank, Ph.D.

Michael Shank, Ph.D., is the Director of Foreign Policy at the Friends Committee on National Legislation in Washington DC. Michael is also Adjunct Faculty and a Board Member at George Mason University's School for Conflict Analysis and Resolution, Board Member at Communities Without Boundaries International, Senior Fellow at the French American Global Forum and the Just Jobs Network, and Associate at the Global Partnership for the Prevention of Armed Conflict.  Prior to joining FCNL, Michael served for four years as a congressional staffer, working as US Congressman Michael Honda's Senior Policy Advisor and Communications Director.

Michael's career over the past 20 years has involved UN, government and non-governmental organizations in the US, Europe, Middle East, Asia, Africa and Latin America, as an adviser on diplomatic, economic, energy, and environmental security and policy initiatives.  Michael's Ph.D. from George Mason University's School for Conflict Analysis and Resolution focused on Climate Conflict.

 

Contact Michael Shank, Ph.D.

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