NAFTA Chapter 11 Investor-to-State Cases: Bankrupting Democracy

In the spring of 2001, President George W. Bush asked the U.S. Congress to delegate to him a 6-year chunk of Congress constitutional authority over international trade through a process called Fast Track. Bush seeks Fast Track trade authority (which his Administration is attempting to rename "Trade Promotion Authority") to expand the 1994 North American Free Trade Agreement (NAFTA.) The proposed NAFTA expansion, formally called the Free Trade Area of the Americas (FTAA), would spread NAFTA's rules to an additional 31 Latin American and Caribbean nations by 2005.

The publicized goal of the FTAA proposal is to facilitate trade and deepen economic integration by expanding the NAFTA provisions that eliminate tariff and nontariff barriers to trade and investment throughout the hemisphere. Careful consideration of NAFTA's record therefore becomes central to discussions of Fast Track and the FTAA.

Thus, this year, Public Citizen is releasing a series of reports on NAFTA's actual performance over its seven years in existence. This report, NAFTA Chapter 11 Investor-to-State Cases: Bankrupting Democracy, analyzes NAFTA's groundbreaking investment chapter, which granted expansive new rights and privileges for foreign investors operating in the three NAFTA signatory nations: U.S., Canada, and Mexico. It is often said that NAFTA was more of an investment agreement than a trade agreement. Now NAFTA's investor privileges and protections are at the core of the proposed FTAA.

NAFTA's investor protections are unprecedented in a multilateral trading agreement. Since the agreement's enactment, corporate investors in all three NAFTA countries have used these new rights to challenge a variety of national, state and local environmental and public health policies, domestic judicial decisions, a federal procurement law and even a government s provision of parcel delivery services as NAFTA violations. While most cases are still pending, some corporations have already succeeded with these challenges. (Please see the chart listing these cases and their status at the end of the Executive Summary.)

Remarkably, NAFTA also provides foreign investors the ability to privately enforce their new investor rights. Called "investor-to-state" dispute resolution, this extraordinary mechanism empowers private investors and corporations to sue NAFTA-signatory governments in special tribunals to obtain cash compensation for government policies or actions that investors believe violate their new rights under NAFTA. If a corporation wins its case, it can be awarded unlimited amounts of taxpayer dollars from the treasury of the offending nation even though it has gone around the country's domestic court system and domestic laws to obtain such an award.

Supporters of NAFTA claimed that these extensive investors protections and their private enforcement mechanism were necessary to protect investors from the state seizure of private property (i.e., nationalization). Mexico, which nationalized its foreign oil refineries in 1938, was the prime target of these concerns.

However, the majority of the investor-to-state cases filed to date have had little to do with the seizure of property NAFTA supporters feared. Instead, the cases challenge environmental laws, regulations and government decisions at the national, state and local level:

NAFTA'S SMOKING GUN:
WHO DUNNIT AND WHY ?

Can you think of any nation on Earth that would sit idly by and watch its factories and jobs move offshore, and put its own taxpayers out of work? Name one nation on the planet that uses its taxpayer's funds to assist factories to move or expand offshore, and then close operations back in the homeland, and then fire its own workers? There is only one. The United States of America.

Turn the clock back to the early 1970s. Henry Kissinger was flitting around the globe and spending time in the Middle-East. U.S. policy was providing aid and comfort to the various warring enemy factions in the explosive region. OPEC was raising oil prices, and putting a stranglehold on the USA at the gas pump. David Rockefeller at the Chase Manhattan Bank, and the others on Wall Street, lusted to get their hands on the vast sums of surplus petro-dollars held by the oil sheiks. They soon did. That's when the problem began.

Soon the New York bankers were taking in mountains of dollars from the Middle East, and loaning them back out to "Third-world" countries in Latin America. While the international rich elite understood the "art of the deal," the peasant classes in Mexico and Latin America were only one step above the stone age. Ambitious industrial projects failed and the massive debt could not be repaid. Mexico alone defaulted on over $100 billion owed to New York Banks, and the banks were under pressure by the Middle East sheiks who wanted their money back. What to do ?

According to the July 25, 1989 edition of "FINANCIAL WORLD" magazine, meetings to rescue Mexico and get the banks paid, had been held off-and-on in New York since 1987. The investigative article titled, "Sweat Equity" indicates that the most favored scheme was to industrialize Mexico into a low-cost, export-producing giant. The banks would then get a piece of the overall export profits to be paid toward their principal and interest. The unpaid principal balance would be rolled-over each year and whatever could be paid against it credited. Such a system would let Mexico pay the debt painlessly from new income streams. Even better, the banks would be paid! No consideration was given to the devastation this policy would cause to the American worker and middle-class. They were the source to provide the needed wealth from their everyday consumer spending and thus an expendable factor.

This concept was further promoted in the book, "LATIN AMERICA AT A CROSSROADS," which was written and published in August of 1990, by David Rockefeller's Trilateral Commission think-tank based in New York and Washington. It was easy to get the book accepted as USA policy because Jimmy Carter, George Bush and Bill Clinton were all members of the elite club. In fact, the Trilateral Commission member list reads like a WHO'S WHO of government and politics. White House insiders are also often members of the Council On Foreign Relations, which is also nurtured by, and serves the same international and New York financial interests.

Shortly after the Trilateral book was published, a momentum developed to implement the scheme in a legalized method. While congress could not sit still for such a transfer of wealth and jobs by official treaty, another idea was developed. To give the scheme a slim chance at all, the power elite called it an "Agreement" which needed only a simple majority of Congress to pass, and could be "Fast Tracked" to avoid the normal scrutiny. To that end, the thousands of pages of the North American Free Trade Agreement were kept secret from the citizens and press until long after it was signed. Lawmakers and the press were instead given a 45 page "Summary" that was upbeat and filled with happy-talk. Most of the lawmakers on Capitol Hill, financial columnists, and economists who support NAFTA have a curious common denominator. They haven't read it!

Once "released" by the Government, the massive two-volume work was priced at $41.00 and only available through the handful of U.S. Government Printing Office outlets. These stores are not a favorite of "Window Shoppers," and only a few hundred beltway insiders even wanted the document. They naturally wouldn't say much against the policy that had been established earlier. A few voices such as Ross Perot, Ralph Nader, Chuck Harder, Pat Buchanan, Jerry Brown, and Rev. Jesse Jackson soon spoke out with concern, but the media was able to filter them out and keep most of them from reaching large audiences.

Ross Perot also soon found it difficult to buy good TV time and he became a target of ridicule for his actions against NAFTA. While the "curtain of silence" fell upon anti-NAFTA voices, a strange round of "Shotgun weddings" took place as big media suddenly got merger-mania. Radio crackled with activity, and Westwood One, the owner of NBC,

Mutual, The Source and Talknet, married New York's Unistar. TV soon pictured romance, and a mega-deal cooking with Bell Atlantic, TCI and Liberty Media was the big story. Word was quietly out in the boardrooms that the USA consumers would soon take a monster hit-in-the-pocket-book over NAFTA, and only the strong media would survive. Providing a futuristic metaphor, "USA TODAY" newspaper even revamped its colorful back weather page this summer to include all of Canada and Mexico, while the outline of the continental USA shrunk.

The biggest USA national media corporations also fell in love with the deal after being promised expansion into Mexico to reach new audiences. New American technology to offer 500 channel cable-TV loomed as another threat to take more domestic audience with shrinking bank accounts away from the big network media players. Soon deals were

cooking in the boardrooms to have more USA media merge, and also take positions in the Mexican press and broadcast industry. The big banks, Wall Street, and the stockmarket loved it!

Remember that NAFTA is not a new invention. The banker/politician combine had quietly created policy years ago to allow the set up of the "Maquilladora Region" as a pilot-program along the US-Mexican border. Soon over 2,200 USA factories moved into that 12 mile strip of Mexico during the period from the late 1980's onward. Much had been learned from the early years of operations, and new procedures using low-skill Mexican peasants had been perfected. Industrial engineers learned new designs for assembly operations, and USA trade magazines now report these techniques ready for the expected thousands of new plants and expanded facilities in Mexico as soon as NAFTA becomes law and expands deep into the Mexican continent. Recent financial and real estate conventions held in Washington with capacity-crowds, have also focused on the massive "get rich" Mexican opportunities to soon be created under NAFTA.

To seal the deal, the Mexican billionaire families put up millions of dollars to assist the Salinas government to buy the best lobbyists in Washington. The list of highly paid Mexican agents reads like an "Alumni Roster" of Capitol Hill. The Clinton administration has also announced that, "The store is open." The White House will hand out necessary goodies to sway the undecided members of Congress. The "Fix" is in!

Left out of the deal are the American people. Nobody can explain to them how it's good for America to have millions of jobs move to Mexico? How can USA workers compete with frightened Mexican peasants making 58 cents or a dollar an hour? Government retraining programs have been exposed as multi-billion-dollar-hoaxes because new high-tech jobs don't exist! Unemployed USA workers with families to feed, and mortgages to pay, can't find replacement jobs at the same pay scale, if at all! A permanent underclass is developing and crime is on the increase. In 1994, government regulations will require heads of welfare families to go back to work. Where will those millions of jobs be found ? The NAFTA scheme to pay back the New York banks makes Charles Keating, (the convicted S & L crook), look like Peter Pan. Willing co-conspirators on Capitol Hill don't personally fear the anticipated financial ruin, as they all are vested with government pensions and "Golden Parachutes." The Middle-Class will be affected. They could be retrained to become docile peasants. The "American Dream" and "Rule of Law" is at risk.

Source: http://www.forthepeople.org/NAFTA.htm

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