Rough trade

It was a problem that Lloyd Levine wrestled with for over six years: how to rid the state of a great environmental blight--over 9 million scrap tires filling up California landfills, serving as mosquito incubators, and occasionally igniting into great fires and belching plumes of oily toxic smoke.

As a graduate student at California State University, Sacramento, Levine wrote his master’s thesis on the problem. As a member of the California Assembly representing Van Nuys, he had a chance to do something about it. His bill, AB 338, was simple, even elegant: use all of those tires to pave California streets and highways. Rubberized asphalt has been in use in California for years, albeit in relatively small amounts. Levine’s bill would have required Caltrans to eventually make rubberized asphalt 35 percent of the total asphalt it laid down.

“The asphalt that you can make using recycled tires is better than regular asphalt on all levels” Levine enthused. Rubberized asphalt lasts longer, he explained, it makes for a quieter drive, and, most importantly, it diverts the millions of scrap tires from the landfill.

The bill passed through the legislature easily, and Levine was confident it would become law this year. But he was surprised when, seemingly out of the blue, he learned that Governor Schwarzenegger was going to veto his bill because the administration was afraid that it would violate the rules of the North American Free Trade Agreement.

The problem was that AB 338 required Caltrans to buy tires from U.S. scrap-rubber sources. It makes a lot of sense if you’re trying to clean up tire piles here at home.

But according to the governor’s office, the bill would have exposed the state to lawsuits from Canadian and Mexican companies trying to export scrap tires to the United States.

Levine found out the hard way that the investor-protection provisions in NAFTA and other free-trade agreements can trump the ability of local governments to make their own consumer safety and environmental laws, in order to protect their own citizens.

“This is really a new world to me,” Levine explained. “I thought NAFTA was about trade between companies, about removing tariffs and things like that. I never considered for a second that it would impact the ability of the state to solve its own problems.”

Levine since has learned a lot more about NAFTA, in particular one provision called Chapter 11--not to be confused with the bankruptcy law with the same name--which gives foreign investors unprecedented power to challenge the laws of other countries. And some of the most bitterly fought NAFTA battles have been over environmental laws passed by local and state governments to protect their citizens.

Over the years, Chapter 11 claims by foreign investors have mounted. Critics of the trade rules say they hold harsh lessons for the upcoming debate over the Central American Free Trade agreement (CAFTA), which is expected to come before Congress for ratification sometime in the late spring or summer.

In 1999, a Canadian company called Methanex brought the first NAFTA Chapter 11 claim against a California law. The company, which makes the chemical methanol, demanded nearly $1 billion when California decided to phase out the toxic gasoline additive MTBE. Since methanol is a component of MTBE manufacture, the company argued that the California ban amounted to an expropriation of its future profits.

The claim cost the U.S. government $3 million to defend. In 2002, the United Nation’s Commission on International Trade Law ruled against Methanex, finding that since the company made methanol, and not MTBE, that it was too far removed from California’s ban to be harmed. Since then, Methanex has resubmitted its complaint, which is still pending.

In all, over 40 cases claiming $28 billion worth of damages have been brought against the NAFTA-member governments, according to a report by the corporate watchdog group Public Citizen. Of those, only 5 cases have been won by investors, and governments have only had to pay out $35 million to the investors. But the number of pending NAFTA cases by foreign investors against the United States is on the rise.

Among the most recent is an August 2004 complaint by the trade group Canadian Cattlemen for Fair Trade, which is demanding $300 million from the US government for banning the import of live Canadian cattle after mad cow disease was discovered in that country in 2003.

Closer to home, a Canadian gold mining company, Glamis Gold, has filed a $50 million claim against a California regulation that requires mining companies to backfill open-pit mines that would damage Native American lands.

Last month in Sacramento, the California Chamber of Commerce hosted a luncheon for trade ambassadors from Central America and the Dominican Republic. (Because the trade agreement also includes the one Caribbean nation, it is officially called DR-CAFTA.)

Outside, civil rights and labor activists picketed the Chamber of Commerce building and handed out flyers, decrying what they believe is a lack of environmental and labor protections in the new trade agreement.

Inside, the trade ambassadors urged the business community to tell their congressional representative to pass CAFTA as soon as possible.

“The first labor right CAFTA will provide is the right to a job,” said El Salvador’s ambassador León Rodriguez. “I have yet to see a union of unemployed people,” he added, to laughs from the audience.

Chamber of Commerce representatives also touted the economic benefits of CAFTA to California, citing a study that projects California workers would see 13,000 new jobs and earn almost $600 million more in the decade after CAFTA’s implementation.

Nowhere in the program was there any discussion of the investor protection provisions of these trade agreements. As it is written now, CAFTA contains the same provisions as NAFTA’s Chapter 11, and environmental groups fear challenges against local laws will grow.

“That’s a bunch of hot air,” John Murphy told SN&R as the luncheon was winding down. Murphy is vice president of Western Hemisphere Affairs for the U.S. Chamber of Commerce.

“I keep hearing about NAFTA Chapter 11 and how bad it is for the environment. Anybody can bring a frivolous lawsuit anytime,” he said. “The reality is that in 11 years there hasn’t been one case brought against the U.S. that has been won.”

Indeed, of the five cases that have been won, all have been brought by U.S companies.

But that’s no comfort to Martin Wagner, an attorney with Earthjustice Legal Defense. He said that some cases against the US, like the Methanex case, have been unsuccessful on pretty technical grounds. “I don’t think we can say it won’t happen here. It could easily happen,” Wagner replied.

At the same time, he said, we shouldn’t overlook the impact on developing countries. In 1997, Mexico had to pay a U.S company called Metalclad nearly $16 million after a local government refused to grant the company a construction permit for a toxic waste dump.

“So let’s say that sometime after CAFTA, El Salvador really wants to strengthen its environmental laws. As soon as it starts creating stronger laws that impose new restrictions on investors, those investors are going to immediately look to the investment chapter [of CAFTA] and start challenging those new laws left and right.”

Meanwhile, in California and other states, local lawmakers like Lloyd Levine may have to start looking over their shoulders at NAFTA, when they try to write laws that at first seem to have little to do with international trade.

“Here they are trying to protect the environment and do some good,” said Wagner, “and now they have to worry that their measure won’t pass muster because of their impact on the corporate profits of foreign investors.”

It doesn’t appear that there is much, aside from appealing to Congress, that state and local lawmakers can do. But Senator Liz Figueroa, who heads the Senate Select Committee on International Trade Policy and State Legislation, is trying to make some inroads.

“We in California lead the way in so many different areas, in protecting our water, our coastlines and native lands. But these major pieces of legislation can be vetoed because they violate trade agreements. Excuse me?” Figueroa complained.

The governors of the 50 states do consult with the federal government on various trade agreements, particularly smaller pacts with individual countries. However, the state legislatures (and citizens generally) have been largely left out of the loop, Figueroa said.

Which is why she has introduced SB 348, also titled “Accountability in International Trade Policy.”

The bill is still in its infancy, but could require the governor and the state Legislature to agree on whether or not to support trade agreements, before giving the state’s blessing. Or it may wind up doing little more than to air out such agreements in a public forum. But that, Figueroa said, would be a start.

“We’d like to have some input,” she added. “But at least let us know what’s in these trade agreements when they go by the Governor’s desk.”

Now I've learned something fromt his article.

States consent to be bound by international trade agreements. Does anyon know what the mechanism is for this?

Here is partial text of the bill by Senator Figueroa mentioned in the article?

BILL NUMBER: SB 348

Existing constitutional provisions authorize the Legislature to provide for the selection of committees necessary for the conduct of its business, including committees to ascertain facts and make recommendations to the Legislature on a subject within the scope of legislative control. This bill would require that the state's consent to be bound to any provisions of an international trade agreement, and the degree of that consent, be determined solely by statute. The bill would require that, within seven days of receiving a letter requesting the state's consent to be bound to the provisions of an international trade agreement, the Governor notify the Legislature by submitting the letter, or copies of the letter, to the Senate Committee on Rules and the Office of the Speaker of the Assembly. The bill would require the Legislature to take legislative action to define the degree of consent to provisions of international trade agreements, including, identifying which branches, departments, and agencies of the state government that are bound by the provisions, and would further provide that if the Legislature does not take legislative action to consent to the agreement, the state is not bound to any provision of the international trade agreement. The bill would require that before any consent for the state to sign on to any provision of an international trade agreement, the Legislature and the Governor take joint affirmative action toward consent.

d) California laws are already being challenged under existing international trade rules. NAFTA, which grants foreign firms new rights and privileges for operating within a state that exceed those granted to United States businesses under state and federal law, has already generated two regulatory takings cases against California laws protecting public health and governing land use.

e) Government procurement provisions contained in international trade agreements affect the ability of states to enact common economic development and environmental policies, such as buy local laws, recycled content laws, and renewable energy purchasing requirements. Government procurement provisions subject such laws to challenge as barriers to trade as they contradict the obligations in the international trade agreement.

(h) Consequently, a mechanism for federal government international trade negotiators to consult with the California Legislature prior to binding California to conform its existing laws to the terms of international trade agreements is necessary to ensure democratic accountability in international trade agreements.

http://info.sen.ca.gov/pub/bill/sen/sb_0301-0350/sb_348_bill_20050329_amended_sen.html

And the "free traders" say that "free trade", the WTO and NAFTA have no effect on sovereign laws.....

Americans are not the only ones being hung out to dry....

Guatemalan bishop joins voices opposing trade treaty

With far less of the uproar that surrounded the passage of the North American Free Trade Association (NAFTA) treaty in 1994, the next stage, the Central American Free Trade Association (CAFTA) is being ratified without the Central American people’s consent.

This was the contention during a March 10 teleconference with two Central Americans opposing CAFTA. They described the treaty as one in which “transnational corporations will have all the rights, and will destroy the Central American common market.”

CAFTA will create a free trade zone that includes the United States, Nicaragua, Honduras, Guatemala, El Salvador, Costa Rica and the Dominican Republic.

In a damning comparison with the European Union’s approach to absorbing poorer nations into its common market, Costa Rican parliamentarian Ottón Solis said, “Larger European countries opened up their labor markets for the poorer regions of Europe. CAFTA does not. And CAFTA doesn’t have a cent in aid to assist with the economic consequences of the treaty. Compare that to Europe, where Ireland, since its incorporation into the EU, has annually received an average of 3.5 percent of its Gross Domestic Product (GDP) in EU grants.”

Bishop Alvaro Ramazzini, president of the Secretariat of Central American and Panama Bishops, replying to a question from NCR said the Guatemalan government has “excluded the protesting voices and, though it hurts me and angers me to say it, will actually ratify the treaty.

“We have two political parties in Guatemala that share the same neoliberal vision,” said Ramazzini, bishop of San Marcos, “and they don’t realize the extent of the poverty and marginalization in Guatemala.”

To see how bad things will be for Central America, he said, one only has to look at the plight of Mexico today, where industrial wages have declined by 25 percent since NAFTA’s ratification and undocumented migration from the country has doubled.

“This treaty introduces a race to the bottom. CAFTA was negotiated behind the people’s backs,” said Solis, founder of the country’s Citizens Action Party. “It was negotiated at the margins; only the top hierarchy of the entrepreneurial sectors were consulted.”

Further, said Solis, “it was negotiated under a threat that the United States will take away Caribbean Basis Initiative trade benefits if CAFTA is not ratified. Contrary to what is being said in the United States, it will weaken environmental legislation, and labor legislation.

“There is nothing in CAFTA about technology transfer, nothing on technology cooperation. We want CAFTA renegotiated,” he said.

Dozens of U.S. church groups are among 48 national and international organizations that have lobbied for more than two years against CAFTA’s present form. Those pressing for a change to what the Washington Office on Latin America calls “a CAFTA that fails the standards of justice” include Oxfam, the American Friends Service Committee, Church World Service, the Presbyterian Church USA and the National Catholic Rural Life Conference.

U.S. and Central American Catholic bishops, in a joint communiqué last July, said there had not been “sufficient information and debate about CAFTA and its impact. This troubles us deeply given the obvious imbalance in power and influence that exists between the United States and the Central American countries.”

Further, said the statement, “insufficient attention has been given to the impact of U.S. agricultural products on Central American farmers.” Health care costs will increase because the treaty -- enforcing intellectual property rights -- works against the provision of generic drugs, the basis of health services in countries such as Costa Rica.

The treaty is structurally unsound for small countries, Solis continued. U.S. pharmaceutical corporations’ ability to impose their intellectual property rights and ban generic drugs will mean that Costa Rica’s health service -- like those of the other regional countries -- “will be destroyed,” he said.

And that will come, he said, following a seven-year period in which Costa Rica has managed to raise significantly the living and health standards of its poor.

Both Ramazzini and Solis predicted the deepening of poverty in Central America as trade between the countries disappears under the waves of U.S. imports, as U.S. brand name goods drive local products out of business, and as the modest tariffs currently paid on U.S. imports is abolished -- tariffs which, said Solis, represent some 1.5 percent of Costa Rica’s gross domestic product.

As a consequence simply of the ending of the tariffs on U.S. produced imports, he said, Costa Rica already has to cut back on its health services and social programs, and institute higher taxes.

Said Ramazzini, “Our analysis of the official CAFTA texts confirms the enormous dangers its implementation will pose, potentially affecting our rights, our environment, our well-being. CAFTA is based on a logic that favors profit over human rights and sustainability. More than 60 percent of Guatemalans are rural, agricultural. There is no agricultural development plan [in CAFTA], nothing to benefit rural people. Yet there is 79 percent malnutrition among the indigenous rural population’s children.

“Guatemala is a country,” the bishop said, “with the most unequal distribution of wealth in the region. The gap between rich and poor is very great -- land and capital is concentrated in the hands of a few. Those defending CAFTA, which will further concentrate the wealth, want to retain that status quo.

“The alternative,” Ramazzini said, speaking for the regional bishops whose secretariat opposed CAFTA, “is a real economic development plan.” He lamented that such planning, which takes the people’s needs into account, will now not come about.

The teleconference was organized by Public Citizen’s Global Trade Watch, an advocacy group that argues that the United States will reap unanticipated consequences, not least in more undocumented immigration, from CAFTA.

http://ncronline.org/NCR_Online/archives2/2005b/040105/040105m.htm

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