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Lori Wallach

Lori Wallach

Posted: July 29, 2010 05:21 PM

Turn Away from the Cliff on Trade, State Legislators Group Tells Obama

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It says a lot when the new trade policy platform adopted by the bipartisan National Conference of State Legislatures (NCSL) is more progressive than where the Obama administration is signaling it may be heading on trade.

On the other hand, the "Free Trade and Federalism" resolution passed at the NCSL's annual conference in Louisville yesterday largely restates Obama's campaign commitments to fix the most damaging aspects of the North American Trade Agreement (NAFTA) model.

And, Obama's commitments merely reflected where the country stands. Americans' opposition to more of the same job-killing, unsafe-import-flooding, foreign-tribunal trade deals is a rare subject of broad bipartisan agreement across regions and demographics, numerous polls show.

Everyone is for trade expansion; the question is under what rules and thus who will benefit.

So what the heck was the administration thinking - politically or policywise - when President Obama announced a few weeks ago that he wanted to resolve some outstanding commercial issues with one of Bush's leftover NAFTA-style trade deals and get Bush's Korean Free Trade Agreement to Congress in early 2011?

The state legislators' resolution echoes many of the issues raised in a letter last week sent by 110 House Democrats to Obama on the Korea FTA, announcing their opposition to Bush's deal and calling on Obama to fix it.

It is necessary to fix the commercial imbalances in Bush's Korea FTA deal, but doing so would not be sufficient to avoid worsening our trade mess.

Consider just one issue, the crazy foreign investor rights found in NAFTA and the Central America Free Trade Agreement (CAFTA). The NCSL resolution is hardly radical in stating that the group will oppose trade agreements that provide greater rights for foreign companies operating here than those available under U.S. law. Obama promised to fix the same problem back in 2008.

These investor rules in trade pacts help make it safe and easy for U.S. firms to relocate their production to low-wage countries, by providing extraordinary new rights and privileges if they leave, and allowing them to avoid domestic courts to enforce such perks. On the flipside, these terms also grant foreign investors here expansive new rights (not available to them under U.S. law) to skirt U.S. courts to challenge U.S. laws in foreign tribunals. There, they are allowed to demand U.S. taxpayer compensation for environmental, health, zoning and other policies that they claim could undermine their future expected profits.

In recent years, governments have spent enormous sums of taxpayer dollars defending public health, environmental and land-use policies against trade pact foreign-investor challenges by Canadian corporations under NAFTA. Why Canadian corporations? Because, they are here! There are not a lot of say, Salvadoran firms, operating here who could use the trade pact tribunals.

This gets us back to the lunacy of Bush's Korea FTA. It contains the NAFTA-CAFTA investor rights and allows for their private enforcement in World Bank and UN tribunals. And, there are roughly 80 Korean corporations with approximately 270 establishments now in the United States.

These entities would obtain new rights to demand taxpayer compensation through challenges of U.S. state and federal laws in foreign tribunals were the Korea FTA passed with its current text.

In 2007, NCSL sent a letter to Bush trade chief Susan Schwab, noting that the private investor enforcement system is not appropriate for a deal between two developed countries with sound domestic court systems. The ostensible purpose of the mechanism is so U.S. investors can adjudicate problems in countries that do not have reliable domestic judicial systems.

The Obama administration has said it would work to "fix" Bush's Korea FTA before bringing it to Congress by fighting for more market access for U.S. autos and beef in Korea. But so far it has refused to deal with the investor rules, or the procurement rules that ban Buy America preferences, or the extreme financial deregulation requirements in Bush's pact. Congress, the American public, and now the official voice of our country's state legislatures have made it clear that this is not acceptable.

The state legislators' want to make sure that U.S. trade policy preserves the tenets of our democracy... oh, like separation of powers and checks and balances. They want to ensure that trade agreements maintain the policy space they need to address the economic, climate and health care crises challenging our country. Sounds very reasonable, no?

Obama's pledge to replace the failed NAFTA model helped him win in swing states, with the campaign pumping out forests of materials and airing ads juxtaposing Obama's promised new job-creating American trade model with more of Bush's NAFTA. The moment of truth is now.