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The Trade Agreement California Dodged – For Now

Bill Raden

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In what was widely seen as a stunning rebuke to President Obama’s efforts to speed through congressional approval of the administration’s Trans-Pacific Partnership (TPP) free trade agreement, the House of Representatives last Friday rejected a key measure needed to “fast track” the controversial pact.

The defeat came in a vote on one of two related bills that both needed to pass for Fast Track to move forward — a reauthorization of Trade Adjustment Assistance (TAA) funds, a program that pays for job retraining for those thrown out of work because of free trade deals like TPP.

House Republicans have vowed to get another floor vote on TAA as soon as early this week to allow the White House a second chance at fast track.

The reauthorization failed by a lopsided 126-302 — a margin  attributed to the efforts of a broad coalition of labor unions, environmentalists, consumer groups, and poverty and civil rights groups.

TPP has drawn fierce opposition, partly because of the secrecy surrounding the pact’s exact provisions, but mostly because it is being modeled on 1994’s North American Free Trade Agreement (NAFTA). That Clinton-era deal has been credited with costing California roughly 86,500 manufacturing jobs — and more than 680,000 nationally — just from the direct effects of its  trade deficit with Mexico.

“NAFTA has proven to be disastrous with regard to jobs — quality jobs — and its impact on the environment and lowering [of] labor standards in both the U.S. and Mexico,” University of California, Los Angeles Labor Center director Kent Wong told Capital & Main. “We have seen growing economic inequality in California and throughout the country. We have seen a proliferation of low-wage jobs and a diminishing of high-wage manufacturing jobs. The expansion from North America to now 11 countries in the Pacific Rim would be exponentially disastrous.”

Even more troubling, charge critics, is the potentially devastating surrender of economic and environmental sovereignty that TPP-like pacts represent through a provision known as the “investor-to-state dispute settlement” (ISDS). This is essentially a special legal right to profit that allows foreign investors to bypass U.S. courts and sue the U.S. government before an international arbitration panel comprised of corporate lawyers, if investors feel they haven’t been treated “fairly” or if they believe a federal, state or local law interferes with their expected profits.

In one egregious 2012 example of ISDS being used to evade judgments over environmental contamination, Chevron used arbitration to overturn an $18 billion Ecuadorian court verdict over the company’s dumping and then failing to clean up toxic oil waste that poisoned the indigenous Lago Agrio community’s drinking water source.

In another, 2001 NAFTA-related case, the waste management company Metalclad Corp. sued Guadalcázar, Mexico after that city denied the Newport Beach-based company a permit to build a toxic waste dump next to its primary water source. A trade tribunal eventually ordered Mexico to pay Metalclad more than $15 million.

But it gets worse.

“I don’t think it’s just TPP that Californians should be concerned about,” cautioned Martin Wagner, an attorney for Earthjustice, a San Francisco-based environmental law organization, citing the Transatlantic Trade and Investment Partnership (TTIP) currently being drafted between the U.S. and the European Union. “TTIP is also being negotiated now and will also open up these kinds of challenges to additional corporations that operate in California or could operate in California.”

According to Wagner, the radical expansion of ISDS arbitration represented by the proposed pacts could be especially catastrophic for California’s fragile environment. One scenario sketched by the attorney concerns the state’s deepening record drought and possible emergency conservation measures currently being considered.

“If California were to regulate in a way that increased the cost of water to foreign agricultural corporations that are operating here,” he noted, “or were to limit in some way their access to water, then those corporations would have the right to go to a secretive international arbitration tribunal that is set up not to consider what’s good for the environment or what water measures are appropriate or good for human health, but that is set up to promote trade and promote corporate profits.”

The tribunal would have the power to compel the federal government to compensate those foreign corporations for the cost of any lost profits, thereby neutralizing any conservation incentives.

In another example, Wagner pointed to fracking in California and how the expanded ISDS suits that would result from the new trade deals could have repercussions for any future fracking regulations or an outright statewide ban, including local fracking bans already in place in San Benito, Monterey and Santa Cruz counties, and the city of Los Angeles.

“We have seen many instances already around the world where governments have decided to not even implement regulations they have considered because of the threat of these kinds of international arbitration challenges,” he noted. “So we might not even see the challenge — we just might not ever see what would otherwise be a really good regulation out of fear of this kind of case.”

Marley S. Weiss, a labor law professor at the University of Maryland’s Carey School of Law, believes that the arbitration panels are not TPP’s most severe drawback – that it could drive a stake into the heart of campaigns to revitalize domestic manufacturing, such as Made in America measures tied to government procurement.

“There are a lot of standard clauses in these investor protection chapters,” she says, “and all of them have protections that cause problems, not just for environmental provisions, but for health and safety provisions, worker protection provisions, minimum wage provisions — almost anything.”

“The labor people,” she adds, “have to be concerned about offshoring of jobs. The big impact of TPP and maybe TTIP — though that’s not so clear — is going to be not just on the investor protection end, but also . . . on the opening of government procurement contracts.”

[divider]Base photo: Port of Los Angeles

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