Eyes on Trade

Our own Todd Tucker has a piece on the media distortion of last year's trade debate in this month's edition of Extra!, Fairness and Accuracy in Reporting's magazine. Here’s a snippet:

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In the 16 months leading up to the congressional vote on a set of trade deal with Korea, Colombia and Panama in mid-October, new reporting on the agreements scarcely mentioned that critics existed; when they were acknowledged, their objections were frequently mischaracterized. With media doing little to evaluate misleading claims made by the trade pacts' proponents, all three were approved by Congress by considerable margins.

There were two major points that opponents of the trio of deals – including  labor, environmental, consumer and even Tea Party groups – consistently emphasized in reports, press releases, letters and direct outreach to reporters.

First, these trade deals were modeled on the controversial North American Free Trade Agreement (NAFTA), a pact whose actual content reporters have historically paid little attention to (Extra!, 11-12/97). The combined text of the three new deals was nearly 4,000 pages; as with NAFTA, the bulk of the provisions were not related to "trade" issues per se, but rather restrict how the U.S. and the other nations might regulate their domestic economies. For instance, corporations are given new rights to challenge environmental and other regulations outside of national court systems, and demand that taxpayers compensate them for regulations' potential impact on profits.

Second, unlike earlier trade deals, even the government's own projections showed that the pacts would increase the U.S. trade deficit (Extra!, 10/11). The projections were produced by the independent U.S. International Trade Commission (ITC), which typically produces overly rosy estimates of trade deals' impacts.

But at two of the country's most prominent papers, the New York Times and the Wall Street Journal, such criticisms were almost entirely absent.

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The full article is available by subscription.

After having lost on the merits in Ecuador and U.S. courts, Chevron has turned to an ad hoc “investor-state” tribunal of three private lawyers to help the company avoid paying to clean up horrific contamination in the Amazonian rainforest.

Chevron is trying to get this private tribunal to suspend enforcement of or alter an $18 billion judgment against Chevron rendered by a sovereign country’s court system. The closed-door tribunal will meet in a rented room in Washington, DC Saturday and Sunday (February 11-12).

These unaccountable panels, from which no outside appeal is available, have issued perverse rulings in the past on behalf of corporate claimants. Recent U.S. trade agreements empower foreign corporations to use this system to skirt our domestic courts to directly use our government before these corporate tribunals to obtain payment of unlimited taxpayer funds when they claim domestic environmental, land use, health and other laws undermine their “expected future profits.” Really! This is becoming one of the most controversial issues in the first “trade” deal the Obama administration is negotiating - a new Trans-Pacific Free Trade Agreement (FTA).

Public Citizen, Amazon Watch and the Rainforest Action Network are standing up to Chevron's kangaroo court by organizing a rally and conducting a Teach-In at American University about Chevron's attempt to use the investor-state system to evade justice. They also will be conducting a press briefing. You are invited to attend all events.

As regulators and legislators have wrestled with reforming the financial system in the wake of the crisis, one quiet corner of the debate has received less notice.  As we have reported in past posts, The World Trade Organization’s General Agreement on Trade in Services limits the kinds of financial regulations countries can impose.

These rules were hashed out during the 1990s – before the lessons of the financial crisis, and when deregulation was in vogue. Documents we obtained under the U.S. Freedom of Information Act show that, in the late 1980s and 1990s, U.S. government officials worked closely with Wall Street executives to sell these rules to wary developing nations.

Unlike the re-regulation being discussed in the G-20 or the Bank of International Settlements, these rules at the WTO are highly enforceable. While the near-total absence of re-regulation over the last 15 years has presented few opportunities to road-test this services agreement, tax havens like Panama have already threatened to use them against the tax transparency initiatives of cash-starved countries like Ecuador.  The U.S. lost a high-profile services trade case related to its ban on Internet gambling. Regulatory bans – even of questionable services – are prohibited under the WTO. And a European Commission staff paper about a potential financial transactions tax noted that it would be necessary to assess whether such a tax might conflict with the EU’s WTO commitments.

But the U.S., EU and the WTO Secretariat have spent the last 18 months trying to quash any discussion of these problems, much less consideration of possible updates to the old rules.

WTO Member States Try to Raise Issue at Ministerial Conference

Last fall, a group of countries led by Ecuador tried to get this problem on the formal agenda.  Their modest objective was for Trade Ministers at last December’s  WTO Ministerial Conference to acknowledge the need to review the WTO rules covering financial services in light of the financial crisis and the efforts internationally and domestically to strengthen regulation.

 Ecuador presented its proposal at the WTO’s Committee on Trade in Financial Services (CTFS) in late October in order to get the item on the agenda for December’s meeting.  A powerful bloc of countries – including India, Argentina, Turkey, Brazil, and South Africa – supported the proposal. However, the skewed “consensus” process in the WTO allowed the U.S., EU and Canada to block the discussion from moving forward at the Ministerial Conference, where Ministers would have been forced to recognize that there is a potential conflict between the WTO rules and the global consensus toward financial re-regulation. 

As is often the case in flawed WTO processes, it appears that Ecuador’s proposal was unfairly downplayed, perhaps to ensure that it would not be noted in the Ministerial Conference.   Because the CTFS finalized its Annual Report at the beginning of their October 31 meeting (the last meeting of the Committee in 2011), the discussion on Ecuador’s proposal that occurred later in the meeting was not included in the Annual Reports of the Committee on Trade in Financial Services or of the Council on Trade in Services.  The minutes from the October 31 CTFS meeting state that the Chair of the Committee noted that there was “some” interest in discussing the substantive issues raised by Ecuador.  An observer in the meeting, however, shared with us that the Chair had actually said that there was “broad” support.  The minutes also failed to take note that China and Venezuela supported the proposal, though the representatives from both countries joined the many others present in expressing support for the proposal. 

Ecuador reserved its right to raise the issue at the General Council meeting where the Ministerial Conference’s agenda was finalized.  Despite the fact that there was not consensus on any agenda items for the Ministerial, Ecuador’s proposal was blocked from the agenda, while other agenda items proposed by developed countries remained on the General Council agenda.   Ecuador was forced to raise its proposal under the  “Other Business,” section of the agenda, which was dealt with after 11 pm.  Despite this marginalization, again, a number of countries – including Argentina and Turkey -  spoke in favor of Ecuador’s proposal, and no countries opposed.  In the end, a brief statement about Ecuador’s proposal was included in the General Council’s Annual Report to the Ministers in the documents circulated at Ministerial Conference, but, unfortunately, the summary only lists the countries that spoke, but does not note their support, nor the fact that no country spoke in opposition. 

Activities at the Ministerial Conference

Since the efforts of Ecuador and its allies to include this issue on the agenda of the Ministerial Conference were thwarted, the government of Ecuador hosted a side event “Future of Trade in Financial Services: Safeguarding Stability” to raise this issue during the Ministerial.

During the side event, the Honourable Francisco Rivadeneira, Ecuador’s Vice Minister of Trade and Integration, strongly made the case for why Ecuador proposed a review of the WTO’s financial services rules -  to ensure that WTO members, particularly small countries like Ecuador, have sufficient policy space to engage in the regulation needed to ensure stability of the financial system. Alfredo Calcagno from UNCTAD’s  Division on Globalization and Development Strategies described in detail the concerns raised by UNCTAD’s 2011 Trade and Development Report, particularly how the ambiguities in the WTO’s General Agreement on Trade and Services (GATS) could restrict policy space for capital controls and other financial regulatory tools. Lori Wallach, Director of Public Citizen’s Global Trade Watch division, laid out the potential conflicts between GATS rules and needed financial regulations, based on a review of the legal literature.  Finally, Kavaljit Singh Director of Public Interest Research Centre in India gave a rousing presentation about how the financial sector must be properly regulated to ensure financial stability and inclusion, using examples from the Indian context.  

Unfortunately, the official proceedings of the Ministerial Conference went on in Alice-in-Wonderland - style as if no financial crisis had ever happened.   Without anything real to deliver after more than ten years of negotiations on the Doha round, the WTO struggled to demonstrate its continued relevance by trumpeting the accessions of Russia and Samoa – even though accessions are rarely considered to be news at the Ministerial Conference level.  If the powerful countries in the WTO – and its Secretariat – continue to refuse to acknowledge that its extreme deregulation rules require revision, the WTO will continue to lose legitimacy on the international stage.

 The good news is that Ecuador’s efforts did raise the profile of the issue among important WTO countries and that the Chair of the WTO’s Committee on Trade in Financial Services has agreed to keep Ecuador’s proposal for a review of the rules on the agenda for the Committee in 2012.  It will be important to watch closely to make sure that the U.S. and EU allow a robust review of the rules to go forward.

 

Public Citizen commends the Obama administration for taking the necessary step of appealing today the harmful World Trade Organization (WTO) ruling against U.S. consumer and dolphin protection measures.

In September 2011, a WTO panel ruled that the U.S. dolphin-safe tuna labeling law violates WTO rules. The labels have been enormously successful in reducing dolphin deaths by tuna fishers – a major problem in the past, when tuna fleets set upon dolphins to catch tuna, since the two species associate with one another in the Eastern Pacific Ocean. The label allows consumers to “vote with their dollars” for dolphin-safe methods. Mexico successfully challenged the U.S. standard after decades of refusing to transition its fishing fleet to more dolphin-safe fishing methods.

The ruling’s implications are dire, especially in the context of a decades-long battle to save dolphins. This struggle has been beset by countless trade-related obstacles: 1991 and 1994 rulings under the WTO’s predecessor organization led to the U.S. eliminating the more potent import ban of dolphin-unsafe tuna, and environmentalists fighting successfully in U.S. court to block the Clinton and Bush administrations from also watering down the voluntary labeling policy. These groups narrowly blocked this executive branch effort, which U.S. courts deemed “Orwellian” and “a compelling portrait of political meddling.” The legitimacy of the WTO is likely to be further undermined if the WTO’s Appellate Body upholds the lower panel ruling. Consumer and environmental groups will see that the WTO allows anti-environmental forces a second (or third) bite at the apple, even when such forces fail in their U.S. legal and political efforts to undermine a domestic policy to which they object.

The Obama administration is considering expanding some of these anti-consumer and environmental rules in the first trade deal it is negotiating: the nine-nation Trans-Pacific Free Trade Agreement. The WTO ruling – and two others in 2011 against country-of-origin labels on meat and a ban on sweet cigarettes used to entice teens into smoking – show that a new approach to trade policy is needed, one that puts consumers, the environment and communities first.

The Obama administration made a lot of us environmentalists happy with yesterday's decision to reject the Keystone XL pipeline.

Given that the Canadian government and corporations appear to be steaming mad about this, it's worth all of us reflecting on what their next move could be. A NAFTA case, for one, does not seem out of the question.

(If it seems far-fetched that Canadian entities might pursue these options, think of how much energy they've put into this pipeline. Compare this with how relatively little energy they've put into opposing U.S. financial regulations, yet in that case, they've already threatened to invoke NAFTA to derail the Dodd-Frank financial reform legislation.)

On what basis might a Canadian corporation, say, challenge the decision to reject the pipeline? The pending case against the Sultanate of Oman brought by U.S. investor Adel A Hamadi Al Tamimi under the US/Oman FTA is instructive. (That FTA is modeled on NAFTA.)

Mr. Al Tamimi is a UAE native, naturalized U.S. citizen and real estate developer in New England who invested in Oman through two UAE shell companies.  In 2006, his companies concluded ten-year lease agreements with the Oman Mining Company LLC (OMCO, a state-owned enterprise) related to a limestone quarrying/crushing operation.  OMCO committed to “use its best endeavors” to obtain “the necessary environmental and operating permits.”  In August 2007, OMCO told al Tamimi’s companies that the permits had been obtained, and that he was contractually required to commence operations,  which he did in September. Within weeks, officials from the Commerce and Environmental Ministries told al Tamimi that the final permits had not been obtained, and various stop-work orders were issued. 

As al Tamimi states, “OMCO now had to make a choice: it could fulfill its obligations under the Lease Agreements, which would mean disobeying or confronting the Environmental and Commerce Ministries, or it could use whatever leverage it had over the Companies and exert every effort to get them to suspend their operations until a solution could be found to the permitting issues. It chose the latter.”

By April 2008, al Tamimi had ceased operations.  Al Tamimi racked up various environmental fees, which he apparently did not pay.  In April 2009, OMCO told al Tamimi that he was in violation of environmental laws,  and in May 2009, he was arrested.  After being convicted of stealing and breaking environmental laws by a criminal court in November 2009, his conviction was overturned by an appeals court in June 2010.

Tying this back into the FTA rules... In 2011, al Tamimi launched an investor-state case under the Oman-U.S. FTA. He alleges that Oman expropriated his property rights by terminating the leases and bringing “the full force of the police power of the State to ensure cessation of all activities…”  He additionally claims that Oman undermined “his legitimate expectations” that he would be able to conduct quarrying operations and failed to provide “protection and security,” in violation of the U.S.-Oman FTA’s fair and equitable treatment (FET) standard.  He also says that other quarrying operations which he “believes to be owned and controlled by nationals of Oman” have been allowed to operate quarrying operations, in violation of the FTA’s national treatment obligations.

Similar arguments could be constructed in the Keystone case under NAFTA. TransCanada could point to a long string of overtures by the U.S. government that led it to develop "legitimate expectations" (as that is defined under trade law) that it would be able to build the pipeline, going from the private assurances in favor of the pipeline (recently revealed by FOIA documents to Friends of the Earth) and ending in the December 2011 payroll tax cut (which included Keystone-related provisions).

Those "expectations" could be then measured against what could be characterized under the FET standard as an arbitrary decision-making process, as when the Obama administration delayed the pipeline decision in November 2011 until after the presidential election.

TransCanada could point to some domestic pipeline operators that have not confronted similar hurdles as a basis for a National Treatment claim under NAFTA, while they could point to any lost expected future earnings as a basis for an "indirect expropriation" claim.

Stranger cases over much smaller sums of money have been launched before. There's been an outrageous string of cases against El Salvador over mining permitting issues. Over $350 million in compensation has already been paid out to corporations in a series of investor-state cases under NAFTA-style deals. This includes attacks on natural resource policies, environmental protection and health and safety measures, and more. In fact, of the over $12.5 billion in the 17 pending claims under NAFTA-style deals, all relate to environmental, public health and transportation policy – not traditional trade issues. For a full rundown of these NAFTA-style cases up until now, see this link.

If all of this seems like an outrage, it is. And what's worse is that the Obama administration is considering putting similar investor rules in a NAFTA-style deal with nine nations, called the Trans-Pacific FTA. Stay tuned for more on this!

There's been a flurry of activity recently in the world of investor-state arbitration.

For the uninitiated, these are the foreign tribunals where corporations can directly sue governments for environmental and other policies. These proceedings take place outside of national judicial systems, where corporations can demand compensation from taxpayers for alleged interferences with future expected profits.

This very controversial system has generated some good and some bad news of late.

First, the good news. Last night, the U.S. Court of Appeals for the D.C. Circuit overturned a 2007 investor-state ruling under the U.K.-Argentina Bilateral Investment Treaty (BIT). [HT to Investment Arbtiration Reporter for catching this very quickly.]

Argentina has been hit by dozens of investor-state claims from U.S. and European companies following its 2001-03 financial crisis. (We detail some of these happenings here.)

In the 2007 ruling, Alejandro Garro (U.S./Argentina), Albert van der Berg (Netherlands) and Guillermo Aguilar-Alvarez (Mexico) comprised the panel of three unelected tribunalists that ruled in BG Group's (a U.K. corporation) favor. The panel wrote:

"Argentina adopted certain measures to address its economic, political and social crisis. It is not for this Tribunal to pass judgment on the reasonableness or effectiveness of such measures as a matter of political economy."

Such loving nods to sovereignty are but the preface for the slap-down. The panel wrote that Argentina guaranteed that the energy companies would be paid in dollars at a set rate. When the 2001-03 economic crisis forced revision of the dollar-peso peg (a key recommendation of neoliberal advisors), Argentina was acting "unreasonably" and therefore in violation of the BIT obligation to provide "fair and equitable treatment" (FET).

The panel ordered Argentine taxpayers, many of whom had been pushed into poverty after following the policy advice of the IMF, to cough up roughly $200 million. (This included paying the fees of the company's lawyers. Awesome.)

A U.S. court had jurisdiction to hear an appeal of the investor-state ruling under the U.S. Federal Arbitration Act. National courts hardly ever overturn these investor-state rulings, but the U.S. court wrote:

"Although the scope of judicial review of the substance of arbitral awards is exceedingly narrow, it is well settled that an arbitrator cannot ignore the intent of the contracting parties. Where, as here, the result of the arbitral award was to ignore the terms of the Treaty and shift the risk that the Argentine courts might not resolve BG Group’s claim within eighteen months pursuant to Article 8(2) of the Treaty, the arbitral panel rendered a decision wholly based on outside legal sources and without regard to the contracting parties’ agreement establishing a precondition to arbitration. Accordingly, we reverse the orders denying the motion to vacate and granting the cross-motion to confirm, and we vacate the Final Award."

This is is a positive sign that there are some limits on obscene investor-state rulings. However, U.S. trade and investment agreements don't even have this 18-month requirement, so don't expect any similar overturnings of rulings under NAFTA-style deals anytime soon.

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Speaking of which, there was a ruling over very similar issues under the U.S.-Argentina BIT that was just recently released to the public. That award came down in favor of U.S. investor El Paso Energy International Company, which ordered Argentine taxpayers to pay out over $43 million.

Perhaps taking note of some of the skepticism about these awards against Argentina, the panel of Piero Bernardini (Italy), Brigitte Stern (France) and Lucius Caflisch (Switzerland) dialed back some of the rhetoric, stating:

“As far as the relation between FET and the minimum standard of international law is concerned, two main approaches have been adopted by ICSID tribunals, to which one may add an intermediate, undecided position. … Under the first approach, FET has to be equated with the minimum standard of treatment provided for by general international law. … The second approach deals with FET as an autonomous concept, considered in general as more demanding and more protective of investors’ rights than the minimum standard of treatment provided for by general international law. … The Tribunal considers this discussion to be somewhat futile, as the scope and content of the minimum standard of international law is as little defined as the BITs’ FET standard, and as the true question is to decide what substantive protection is granted to foreign investors through the FET."

But, then comes the slap:

"it could be said that the foreign investor is entitled to the most favourable treatment, be it national law, rules applied to some foreigners or the international minimum standard embodied in FET. The Tribunal thus considers that the FET of the BIT is the international minimum standard required by international law, regardless of the protection afforded by the national legal orders.”

Okay, we started hoping a little too soon.

The panel also went through every one of the specific complaints raised by the investor, and found that none of them violated the BIT. Just as my mood started to pick up a bit, I get to the punchline:

"The Tribunal considers that, in the same way as one can speak of creeping expropriation, there can also be creeping violations of the FET standard. According to the case-law, a creeping expropriation is a process extending over time and composed of a succession or accumulation of measures which, taken separately, would not have the effect of dispossessing the investor but, when viewed as a whole, do lead to that result. A creeping violation of the FET standard could thus be described as a process extending over time and comprising a succession or an accumulation of measures which, taken separately, would not breach that standard but, when taken together, do lead to such a result. 519. The Tribunal, taking an all-encompassing view of consequences of the measures complained of by El Paso, including the contribution of these measures to its decision to sell its investments in Argentina, concludes that, by their cumulative effect, they amount to a breach of the fair and equitable treatment standard."

Dang. What creeps.

Then, the panel just got silly. Argentina reasonably argued that the economic crisis should excuse some of the alleged infractions (the so-called "necessity" defense in Article XI of the BIT). After the panel ran through a bunch of editorial comments from Domingo Cavallo and other architects of Argentina's failed neoliberal strategy that blamed Argentina for causing the crisis (which they characterize as "evidence"), Bernardini and Caflisch write:

"While accepting that 'in economic matters, the analysis of causation … does not lend itself to the same scientific analysis as in the domain of the so-called exact sciences and of natural phenomenon,' the evidence presented by the Claimant regarding the actions and omissions by Argentina until the end of 2001, and Argentina’s own admission of its 'inability to maintain a fiscal discipline,' support the conclusion of a majority of the Tribunal that Argentina contributed to the crisis to a substantial extent, so that Article XI cannot come to its rescue."

Yeah, social science is hard. But if you're looking for causation in this case, why not give it a name? How about Domingo Cavallo, the "expert" now cited as an objective observer of the Argentine scene?

Thankfully (but of little practical consequence), Stern took an opposing view:

"666. Arbitrator Stern, while she agrees, as a matter of principle, with the theoretical analysis of the role played by the contribution by a State to a situation of necessity as expressed in paragraphs
613-626, does not consider that, on the concrete level, the contribution of a State to an economic crisis should be lightly assumed – should the US be held responsible of the worldwide sub-prime crisis as it contributed to it, because the SEC did not monitor the banks closely enough? Moreover, she is of the view that, considering the facts of this case, the substantial contribution of the Argentine authorities to the crisis has not been sufficiently proven by strong and uncontroverted evidence presented by the Claimant.

667. Arbitrator Stern disagrees with the far-reaching conclusion by the majority, which is not based, in her view, on an in-depth understanding of the intricacies of economic development. It should not lightly be assumed that a State is responsible for an economic collapse in a liberal market economy, where the invisible hand of the market is more powerful than the hand of the State. The majority, after having presented the experts’ evidence on both sides and concluded that the latter diverged on the analysis for the responsibilities of the economic crisis, the Claimant expert considering, not surprisingly, that the crisis was primarly self-induced and the Respondent’s expert holding, unsurprisingly too, that the essential factors of the crisis were external shocks. The experts have presented contradictory analyses. The IMF itself recognised that it made mistakes in monitoring Argentina’s problems, as can be seen in the citation of one of its reports in paragraph 657 of this Award, where it is recognised that “the IMF on its part erred in the precrisis period.”

668. Economics is a complicated science or, better, a complicated art; the mere reading of the analyses of the experts of both Parties show that there is little certainty. In Arbitrator Stern’s view, the conclusion reached by the majority is based essentially on a comparative analysis of the expert reports, the Edwards’ Report being described as “comprehensive, very detailed and well documented,” while the Frenkel/Damil report is said to be “rather polemical and only in part based on data from external sources.” In her view, the situation of the Argentine economy was extremely serious and out of control by any definition. Many publicly well known events support this conclusion, and there is no reason to doubt the statement, made by Argentina, that it was “the worst economic crisis (which later became a political and institutional crisis) ever experienced by the Argentine Republic as from its onset in 1810.” A serious clue to the gravity of the crisis was the decrease of Argentina’s contribution to the United Nations: “In May 2002, the critical situation caused the United Nations Organization General Assembly to reduce Argentina’s contribution to such organization. It was the first time in history that the organization decreased the contribution to be made by a member state and the decision was taken unanimously by its members.”

669. Moreover, according to Arbitrator Stern, the measures adopted were necessary to prevent the crisis from resulting in anarchy and social disintegration and they constituted a suitable means to overcome the chaos. It should also be recorded that the policies followed by Argentina before the crisis were generally supported by the World Bank and that the measures taken to address the crisis had the support and encouragement of the IMF. This has been stressed, for example, in Continental: “In its Second Review of January 2001, the IMF staff noted that “the external environment worsened in the subsequent months, with external financing to emerging markets nearly drying up. This was compounded by domestic political uncertainties, which raised doubts about the political governability of the country. (…) The authorities have responded to these adverse developments by strengthening the growth orientation of their economic program, through measures aimed at promoting a recovery of investment, and an accelerated implementation of structural reforms…. “In view of the staff, this strategy is appropriate, and deserves the increased financial support of the international community … A recovery of confidence hinges, in turn, not only on a relatively benign international environment, but perhaps more importantly, on a demonstrated, unwavering commitment by the authorities to a rapid and full implementation of their announced policies.”

670. In other words, Argentina adopted mainstream policies, following the Washington consensus, and earned praise for its conduct from the international financial community. Therefore, Arbitrator Stern is inclined to adopt the same conclusion as in Continental, i.e. that the evidence is insufficient to conclude that the policies adopted by the GOA before the crisis were mainly responsible for the crisis."

Will there be any basis for a national court overturning this ruling? I wouldn't hold your breath.

[Update 1/19: Just to be clear on this last point, the El Paso case was brought under the World Bank's ICSID rather than the UNCITRAL rules (which were operative in the BG Group case). There is a limited basis within ICSID for annulment of a tribunal ruling. So a national court would be unlikely to overturn the El Paso ruling for two reasons: because of the differing ICSID rules, and because the U.S.-Argentina BIT (unlike the UK-Argentina BIT) doesn't have an 18-month exhaustion requirement. HT to an alert reader for catching the fuzziness of my statement here.]

On the streets of Chicago, Lima, Honolulu and Kuala Lumpur this year, it was pretty clear that the 99 percent oppose the proposed Trans-Pacific Free Trade Agreement (FTA).

 But it will be news to many that the majority of Japanese Members of Parliament (the Diet) also oppose Japan’s joining the NAFTA-style deal.

 Last November, Japanese Prime Minister Yoshihiko Noda announced that Japan would begin discussions with related countries toward joining the Trans-Pacific deal. Prior to his announcement, a so-called “Parliamentary Caucus to Cautiously Consider the TPP” – led by Masahiko Yamada, the former Minister of Agriculture, Forestry and Fisheries,- adopted a resolution against such a “pre-mature pledge”. Later, 365 of 722 Diet members signed a petition that states the government should not join the TPP.

This majority Parliamentary Caucus sent a delegation of six Members of Parliament from Japan’s ruling party (DPJ), led by former Minister Yamada, to Washington DC from January 8 to 12.

At a press conference on January 11, they shared some of their perceptions from the visit.  Eyes on Trade was there to report on what they said.

Representative Nubuhiko Suto explained that the purpose of the delegation’s was to explain the Diet’s and Japanese position on the Trans-Pacific FTA to U.S. government and other stakeholders, and also to engage in discussions on intellectual property, agriculture and health care to see if the two countries could come to a mutually agreeable understanding moving forward. They visited the USTR and State Department; the offices of 11 members of Congress to exchange views with fellow parliamentarians; 13 trade/business associations, including rice, beef, farmers, pharmaceutical organizations; the World Bank’s International Center for Settlement of Investment Disputes (ICSID), to discuss more about the investor-state resolution system in FTAs; civil society organizations; and U.S. scholars.

Former Minister Yamada opened by saying he had expected that nearly everyone in the U.S. would be supporting “free trade,” but he was surprised by the polling numbers he had seen: that 69% of Americans believe that “free trade” has led to job loss and that 53% of Americans believe that “free trade” has hurt the U.S. During the delegation’s meetings with 31 stakeholders during their 3 day visit, he was surprised to learn that many in the U.S. are concerned about current trade policy, including some of the U.S. Members of Congress. He noted that they certainly met with organizations and individuals that supported the TPP, but he also noted that some of them did not seem very familiar with some of the provisions, such as the investor-state dispute system, and therefore believed that once there was more of a debate on the substance of the agreement, more opposition in the U.S. may be forthcoming.

Minister Yamada stated that at one point in Japan, there was the impression that the TPP would only be bad for agriculture, but now the public is concerned about more issues, such as how it could undermine public health and the implications of the investor-state provisions. After conversations in the U.S., his two biggest concerns are intellectual property provisions and investor-state issues. The Minister was very concerned when, during a visit with a pharmaceutical trade association, the delegation was told that patent and data exclusivity periods could be extended (they weren’t told how long). Given Japan’s different patent system, the delegation was concerned that Trans-Pacific FTA could require changes to their regulatory standards and negatively impact their pharmaceutical industry and public health.

Both Councillor Masako Ookawara, a member of Japan’s Upper House, and Minister Yamada made strong points about Japanese consumers’ keen interest in food safety and food labeling.  The delegation met with representatives of the biotech industry and was very disturbed to learn that the Trans-Pacific FTA might lead to reversal of GMO labeling. She explained that Japan is currently in the process of consolidating their GMO labeling laws, which leads to concern that Japan’s entrance in the Trans-Pacific FTA could interfere with that process.  Minister Yamada expressed that, given Japan’s high pesticide and chemical standards, he believed that it would be a big problem in Japan to have to implement U.S.-based standards. Ookawara also noted her surprise that there seemed to be much less public debate about the Trans-Pacific FTA currently occurring in the U.S. than in Japan, where every day there is coverage about the Trans-Pacfic FTA in the mainstream press.

While the Noda administration had been assuring the Diet that Japan could achieve exclusions in the negotiations, the delegation was disturbed by the confirmation they received from Deputy US Trade Representive Demetrios Marantis and colleagues that there would be no exclusions in the Trans-Pacific FTA – that the goal was zero tariffs on all products (with a potential phase-in period) and conformity in rules and regulations in all TPFTA countries. In such a form, Minister Yamada asserted that the Trans-Pacific FTA would not pass the Japanese parliament.

The delegation was also concerned about the lack of information with regard to the substance of the Trans-Pacific FTA negotiations. Representative Suto noted that the only portion of the text they had seen had been the leaked texts of the U.S. proposal for the intellectual property chapter. The delegation, therefore, asked U.S. government officials and trade associations to provide more information about the U.S. positions in this and other areas, and were quite shocked that the response was that Diet members should refer to the U.S-Korea Free Trade Agreement. Knowing that this FTA has been such a divisive domestic issue in Korea, the delegation was disturbed that the U.S.-Korea FTA would be the model.

Finally, the delegation warned U.S. officials at the State Department that it is important for both countries to examine the TPP through the lens of security as well as trade. Minister Yamada stated that he informed the Deputy Assistant Secretary that 365 Diet members (more than half) are opposed to the Trans-Pacific FTA, and that if the Japanese government proceeds with the negotiations, the Diet will not ratify it. He also told the State Department officials that many Japanese and particularly young people feel that the deal is being imposed on them by the U.S., and that he feared that this could give rise to anti-American sentiment. Therefore he advised the U.S. to proceed cautiously and to make sure that the Japanese people feel that they are equal partners and receive the information necessary for them to feel comfortable.

 

Washington Post food reporter Tim Carnan writes about the controversial WTO rulings against U.S. dolphin-safe tuna labels and country of origin labeling for beef, quoting the Eyes on Trade Blog and Lori Wallach, Director of Public Citizen's Global Trade Watch.

Read the full Washington Post article here.

By Tim Carman, Tuesday, January 10, 10:06 AM

You might have missed this while you were busy taking the kids to school and preparing for the holidays, but last fall, two U.S. food labeling programs suffered serious legal setbacks that threaten to confuse consumers and thwart the intentions of the “dolphin-safe” tuna and “country-of-origin” labels.

The details are complicated, but in September and November, two dispute panels for the World Trade Organization in Switzerland sided in part with Mexico and Canada on complaints against the voluntary dolphin-safe label and the U.S. Department of Agriculture’s mandatory country-of-origin labeling (COOL). Mexico argued that U.S. dolphin-safe standards are misleading and discriminate against the controversial fishing techniques that Mexico employs to catch tuna. Canada argued that the COOL program discriminates against imported cattle and hogs.

Reactions to the WTO rulings have ranged from tranquil to concerned to downright outraged. Major U.S. tuna producers say they won’t change their dolphin-safe sourcing standards even if they have to change their labels. Pork and beef producers worry that Mexico and Canada might apply tariffs to U.S. meat imports if the U.S. government doesn’t comply with the WTO rulings on COOL, a regulation the meat industry has had mixed feelings about since its implementation in early 2009.

And some nonprofit groups are frustrated that the United States finds itself in this position at all. They’ve long predicted that America’s binding membership in the WTO could lead to this: sacrificing important U.S. environmental and public-safety laws in the name of free international trade.

“There has been widespread concern,” wrote the nonpartisan advocacy group Public Citizen after the dolphin-safe ruling in September, that the WTO could “second guess the U.S. Congress, courts or public by elevating the goal of maximizing trade flows over consumer and environmental protection.”

 

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Appeal of Trade Pact Ruling Necessary First Step

Statement of Todd Tucker, Research Director, Public Citizen’s Global Trade Watch

Public Citizen commends the Obama administration for taking the necessary step of appealing the harmful World Trade Organization (WTO) ruling against U.S. efforts to reduce teen smoking.

In September 2011, a WTO panel ruled that the U.S. ban on flavored cigarettes – which are used to entice teens into smoking through cola, strawberry and clove flavors – violated WTO rules because one of these flavors (clove) is predominantly found in imports from Indonesia, another WTO member.

It would pose an unacceptable barrier to public health if any time a good is imported it has to be excluded from regulation, so this appeal is necessary both to defend the law and discourage further WTO attacks on consumer protection policies.

Corporate interests have been relentless in attacking anti-smoking measures, which took a giant leap forward with the signing into law of the 2009 Family Smoking Prevention and Tobacco Control Act (FSPTCA). The flavored cigarette ban was a key plank of the FSPTCA, which envisions a possible future ban on other flavored cigarettes such as menthols. One of the other major planks of the FSPTCA – enhanced warning labels – is currently being attacked by tobacco companies in federal courts. The legitimacy of the WTO is likely to be further undermined if the agency’s Appellate Body upholds the lower panel ruling.

Consumer and public health groups will see that their policy priorities are being undermined by industry in domestic courts when there is a U.S. law basis for a claim, and in the WTO when there is not. The combined effect is fatal to the viability of public interest regulation.

The Obama administration is considering expanding some of these anti-consumer rules in the first trade deal it is negotiating – the nine-nation Trans-Pacific Free Trade Agreement. The WTO ruling (and two others in 2011 against country-of-origin labels on meat and dolphin-safe labels on tuna) shows that a new approach to trade policy is needed – one that puts consumers, the environment and communities first.

Public Citizen, the Teamsters, and the Sierra Club filed an opening brief earlier this week on our lawsuit to stop the Obama administration's illegal program to allow unsafe Mexico-domiciled trucks to travel throughout the United States. It's the latest development in the story about how NAFTA may force the United States to lower its highway safety standards by permitting Mexico-domiciled trucks on its roads.

NAFTA included a requirement that all three countries’ highways be fully accessible to trucking companies based in any NAFTA nation by 2000, an item pushed by large U.S. trucking firms seeking deregulation and lower wages. However, the Department of Transportation studies have found that Mexico-domiciled trucks have much worse safety records than U.S. trucks, so public opposition has stymied attempts to open all U.S. highways to these trucks. In 2007, Congress put strict conditions on any pilot program that would evaluate the performance of Mexico-domiciled trucks on U.S. highways.

The Obama administration chose to ignore some of Congress’s conditions when it initiated a pilot program this October. Under the program, Mexico-domiciled trucks entering the United States do not need to show that they are built to U.S. safety standards, nor do drivers of these trucks need to meet all physical standards required of U.S. drivers. Furthermore, the administration did not follow proper procedures when conducting an environmental impact assessment. The program does not even serve its stated purpose of evaluating the ability of Mexico-domiciled trucks to operate safely in the United States, since there is no plan to collect a statistically valid sample of program participants. Finally, Congress insisted that any pilot program achieve comparable access for U.S. trucks in Mexico, but due to the limited availability of certain fuels, the program does not guarantee reciprocal access to Mexico for U.S. trucks.

For more background on NAFTA trucks, visit our landing page on the issue.

(Image courtesy of the Missouri Department of Transportation)

Remember the Volcker Rule? Proposed by former Federal Reserve Chairman Paul Volcker and endorsed by five former Secretaries of the Treasury, it aims to prohibit commercial banks from trading stocks, bonds, currency, and derivatives for their own profit. (Customers of banks could still ask their banks to buy and sell these financial instruments if the customers front the cash.) Banks' risky trades played a huge role in the development of the 2008 financial crisis and precipitated the bailout for these overextended banks.

A form of the Volker Rule made it into the Dodd-Frank financial reform bill that became law in 2010, but bankers are trying to cripple the rule as regulatory agencies write the details of how the rule will work. The Investment Industry Association of Canada has raised the possibility of attacking the Volker Rule with NAFTA. In a letter sent to the Federal Reserve last month, the Association claims:

[T]he Volcker Rule will clearly interfere and raise the costs of cross-border dealing in Canadian securities. As a result, the Volcker Rule may contravene the NAFTA trade agreement.

The Investment Industry Association of Canada perfectly illustrates how "trade" agreements can reach inside nations' borders and interfere with public interest regulations that have nothing to do with the flow of goods between countries. Since NAFTA was enacted, bankers have gotten much more aggressive in their attempts to block regulation through trade deals. For example, the Korea FTA, passed by Congress in October, included much worse restrictions on financial sector regulations than NAFTA. On top of that, the General Agreement on Trade in Services of the WTO has its own set of rules that conflict with policies on capital controls, bans on risky financial services, size limits on banks, and “firewalls” between banking and investment services.

Necessary efforts to make our financial system stable like the Volker Rule may continue to run into obstacles unless we have a turnaround in trade policy to protect, rather than restrict, the right of governments to regulate in the public interest.

The Occupy movement was in full force in Washington last week, as local activists and members of Trade Justice New York Metro attended the Trans Pacific Free Trade Agreement (FTA) hearings. The activists wanted to tell members of Congress as well as officials from the Office of the U.S. Trade Representative (USTR) that the Trans-Pacific FTA needs to live up to the high standards the Obama administration promised the American people.

The activists donned t-shirts, with the messages “Don’t Trade Our Lives Away,” “Make Trade Fair for the 99 percent,” and “Got Text?” to represent their opposition to the way the Trans-Pacific FTA has been negotiated thus far. During an intermission between panelists, the activists linked arms and stood by the door to allow the press and members of Congress to read their messages of dissent. The Capitol police photographed the activist attending the hearing and then promptly asked them to leave. While it was clear that the 99% was not wanted at the hearing, the 1% took center stage before the powerful Ways and Means Committee, which oversees trade deals.

First, the panel heard the testimony of Deputy U.S. Trade Representative, Ambassador Demetrios Marantis.

Angela Hoffman, Vice President of Global Integrated Sourcing and Trade for Wal-Mart Stores, also testified in favor of some very one-percenter policies. The Wal-Mart representative stated, “USTR should consider alternative approaches to yard forward provision.” The “yard-forward rule of origin” provisions was presented by members of Congress trying to protect over 470,000 American workers in their districts, who are employed in the US textile industry and cannot compete with the low wages paid to workers in Vietnam and China. Wal-Mart also pushed for greater liberalization of non-tariff regulations such as “limitations on size, geographic locations and merchandise assortment.

One of the concerns presented by the activists is the lack of transparency. While Obama and the USTR stated that they would usher in a new era of transparency, this has not been the case. Instead, the only text of the negotiations that has been released is a memo of understanding signed by the Obama administration and negotiating parties that they will not release the text of the negotiations until 4 years after the deal is concluded or the talks have ended. Activists were also concerned with troubling limitations on access to medicines, which may occur if trade negotiators extend intellectual property rights as well as data exclusivity beyond the May 10, 2007 agreement, which helped to increase access to medicine by allowing low income countries to produce generic medicines under more flexible arrangements.

Members of Congress have also issued letters to the United States Trade Representative, Ron Kirk, to ensure that the new TPP negotiations do not worsen access to medicines for critical programs to combat AIDS, malaria, tuberculosis, and other life-threatening diseases. Yet, it seems as if US trade negotiators hear the voices of the 1% far louder than those of the 99%, and are now considering a medical pricing proposal brought to them by Big Pharma. We have not forgotten the words made when President Obama was simply the Senator from Illinois, fighting for the 99% “Together, we must forge trade that truly rewards the work that creates wealth, with meaningful protections for our people and our planet.” We will fight to keep this promise even if the 1% do not.

Just when we thought that that the World Trade Organization (WTO) couldn’t do worse, it managed to wrap up 2011 with a series of dreadful decisions. The international body ruled against our country-of-origin labels on meat, dolphin-safe labels on tuna, and our ban on candy and clove flavored cigarettes. These are all US consumer policies we rely on to allow us to protect children’s health and make informed decisions. Thanks to such rulings, our government will have to either water down or eliminate these safeguards, or face trade sanctions.

It begs the question: Will this be last holiday season that you have a right to know where your food comes from, and how the environment, animals and people were impacted in its production?

We hope not. The press and Congress may be asleep at the wheel on this issue, but consumers can sound off the alarm by asking their congressional leaders to sign the Consumer Rights Pledge—a pledge to protect policies from the attacks of Big Business and a shameful WTO.

Our own Todd Tucker stopped by the Thom Hartmann program to explain how two recent WTO rulings might undermine consumers' right to know exactly what they are eating.

Check out the full interview here:

GTW will be heading to Geneva next week to join the global civil society response to the World Trade Organization's 8th Ministerial Conference. Our colleague Deborah James from Our World Is Not For Sale Network wrote this informative piece, published in Common Dreams, which explains the current complexities facing the multilateral trading system and our global call from civil society for a "WTO Turnaround".

**** WTO Turnaround: Food, Jobs and Sustainable Development First! by Deborah James

December 15-17, 2011, Trade Ministers will convene in Geneva, Switzerland for an 8th WTO Ministerial Meeting. After many failed Ministerial meetings and nearly ten years of negotiations, the Doha Round of WTO expansion is at a crossroads. Increasingly, developed countries have tried to push aside agreements to negotiate on key developing country issues intended to correct the imbalances within the existing WTO, which formed the basis of the development mandate of Doha. Instead, rich-country governments appear to be re-packaging the old liberalization and market access demands of their corporate interests as so-called “21st century” issues. This Ministerial will determine the future path of WTO negotiations, and the global Our World Is Not for Sale (OWINFS) network is calling for a fundamental transformation.

November 30 marked the 12th anniversary of the massive protests against the World Trade Organization (WTO) in Seattle, Washington, which succeeded in preventing the launch of the so-called “Millennium Round” of WTO expansion negotiations. Developing countries, led by African ministers and buoyed by massive street protests, opposed the launching of a new round of liberalization, focusing instead on their demands to fix the problems left over from the last round. Two years later, after receiving promises from rich countries that the next round would focus on development, these same countries acquiesced to a new “Doha Round.”

Throughout the last ten years, negotiations have collapsed several times, but have always been re-started. Unfortunately, the development mandate has been all but abandoned, with negotiations shifting to focus on the desires of corporations in rich countries, in services, agriculture, and manufactured goods, to achieve greater access to markets in developing countries. Nevertheless, they came perilously close to concluding in the summer of 2008. Since then, the emergence of the economic crises has resulted in a global re-think of the neoliberal economic model by citizens around the world, with resulting domestic pressure against governments to further entrench such a calamitous economic paradigm.

photo: RonnieHall

In many countries – such as Brazil, India, South Africa, and China – leaders are no longer willing to roll over to U.S. and EU demands, as their geopolitical power has grown along with their economies. A key demand of the United States, roiling under the surface of the negotiations, is that these countries should no longer be treated as developing countries – although they have far more poor people than all of the Least Developed Countries (LDCs) combined. The Obama administration decided that since it could not get much of a stimulus package through the Republican-controlled House, the U.S. would focus on increasing exports to these “emerging markets” as a way to boost U.S. economic recovery. But since many of these countries did enact stimulus programs adequate to the size of their economies, and were thus faster on the road to recovery after the crisis than the United States, they are understandably reluctant to bail out the U.S. economy at the expense of their own jobs and development potential. (Unfortunately, past experience with WTO and bilateral trade agreements demonstrates that they are net job losers, thus exposing the jobs claim as a cover-up for pushing the trade agenda of corporate donors.)

Thus, no one expects the Doha Round will be concluded when negotiators meet December 15-17 in Geneva for the 8th Ministerial Conference of the WTO. This surely is a victory of monumental scale for the trade unions, farmers, consumer groups, and development advocates who have worked against the conclusion of the Round for a decade. Although the WTO has receded from the headlines, these groups – organized together in the Our World Is Not for Sale (OWINFS) global network – have maintained a focus on increasing accountability of their respective governments to their democratic demands, and their victory should be celebrated by the 99% who benefit from avoiding a potential de-regulatory and economic catastrophe.

Given the current Doha stalemate, the keystones of the Round – Services, Agriculture, and trade in goods (called Non-Agricultural Market Access, or NAMA, in WTO parlance) are on hold for now. So what will happen in Geneva in two weeks? And more importantly, what does this impasse say about the future of the multilateral trade agenda?

Ministerial Agenda: New Members, Yes; Financial Reform, No; LDC market access, Sort of

One item on the agenda at this month’s ministerial will be accepting new members, a process called accession. The tiny island nation of Vanuatu joined the WTO last month, and the acceptance packages of Samoa and Russia will likely be touted as major “deliverables” of the meeting (even though these accessions can be accepted at any routine WTO General Council meeting.) The spin that will emerge from the WTO Secretariat – that this somehow proves the continued relevance of the WTO – should be cause for laughter.

Vanuatu’s population is less than that of Norfolk, Virginia, while Samoa’s barely exceeds that of Worcester, Massachusetts. Nonetheless, Samoa – which suffers from one of the world’s worse obesity epidemics – is being forced to lift its ban on super-fatty turkey scraps as part of its accession package (the U.S. poultry exporters’ lobby is ecstatic.) And a wide coalition of local communities, NGOs, churches, tribal Chiefs and business leaders in Vanuatu organized in the “Say No to WTO campaign” recently slammed the undemocratic way the accession agreement was passed by the parliament without citizens’ knowledge of the content of the deal, particularly after organizers were threatened with arrest if they engaged in planned anti-WTO protests. And while Russia is currently the largest economy outside of the WTO, its joining now reflects more of Obama’s desire to “reset” relations with that country, as well as U.S. leverage over Georgia to pressure it to withhold its opposition, than any WTO achievement.

What does actually reflect on the WTO’s legitimacy is that throughout the economic crisis of the last three years, the rhetoric within the WTO has remained unbelievably deaf to the way the WTO’s own deregulation and liberalization rules, particularly in the financial services sector, helped to set the stage for the financial crisis and subsequent global recession. The WTO Secretariat has repeatedly tried to sell an image of the WTO as a “savior” in the crises, because countries did not use as many measures to protect their economies as neoliberal ideologues had feared. But the fact remains that efforts to remove financial sector safeguards have only increased in the last three years within the WTO – despite the fact that nearly every national government and international body, from the United Nations to the G20, has acknowledged the need for increased regulation of the out-of-control financial sector that helped cause the collapse of the housing bubble in the United States to metastasize into global economic crises of historical proportions.

Uncontrolled speculation in European financial markets has also played a significant role in the current crisis in the eurozone, as bond traders have pushed up interest rates – sometimes deliberately – in the weaker eurozone economies to unsustainable levels. Although the policies of the European Central Bank and European authorities are still the main problem, financial markets and speculators have contributed greatly to several acute crises over the last year and a half. And the crisis in Europe has already slowed world economic growth, and could push the world economy into recession if it gets worse.

Fortunately, some countries have realized the danger of further financial sector liberalization, and are seeking to assess whether the WTO shouldn’t take up the global call for increased public oversight of financial markets instead. Ecuador, supported strongly by India, Argentina, Barbados, Bolivia, Brazil, Cuba, the Dominican Republic, South Africa, Turkey, and many civil society groups, put forth a proposal for the WTO to merely review “the WTO rules so as to promote and ensure the preservation of policy space for macro-prudential regulations and the integrity and stability of the financial system.” But this modest language was nonetheless opposed by the U.S. and the E.U., along with Australia, South Korea, Canada, Taiwan, and Norway, and thus is unlikely to be reflected in any Ministerial outcomes.

Other less headline-grabbing issues will be on the agenda, according to a summary of “Elements for Political Guidance” released on December 1st. A few changes will be approved regarding the TRIPS (Trade-Related Aspects of Intellectual Property Rights) agreement, which is the most trade-distorting of all the WTO agreements in that it codifies a transfer of wealth from South to North, and from consumers to patent-holders, based on patent and copyright monopolies – ironically the opposite of the “free trade” agenda that the WTO uses to promote itself in the media. The proposed changes include an extension for LDCs to implement the TRIPS agreement – that is, to protect the patents and copyrights that generally belong to corporations in rich countries. It also extends a moratorium on bringing “non-violation” complaints based on TRIPS. These are complaints in which the country is not accused of actually violating the agreement, but a patent or copyright holder claims that they lost some economic gain anyway.

But these issues are only a shadow of the small, concessionary package of proposals for the LDCs (comprised of 33 African and 14 Asian countries and Haiti), that the United States spent a greater part of this year tanking, despite near-universal support from the other 152 members of the WTO. While the rest of the world agreed that the poorest countries (with an average per capita income of under $2.50 a day) should not pay the price for the stalemate between the middle income and the rich countries at the WTO, the U.S. refused to offer the poorest nations a leg up if the Brazils of the world would not have to do the same. This LDC package was intended to be an “Early Harvest,” indicating that the proposals could be separated from the “single undertaking” under which all Doha Round agreements were to be concluded simultaneously. (Early Harvest is, of course, a hilarious misnomer, given that the original target date for the Doha Round’s conclusion was January 1, 2005.)

According to the Third World Network, the LDC package would have included: duty-free quota-free (DFQF) market access for LDC exports; simplified rules of origin (which would allow LDCs to increase their exports); cotton (meaning a major reduction in subsidies from U.S. taxpayers to the powerful U.S. cotton industry, which undercut world market prices and have had a devastating impact on millions of poor cotton producers in West Africa); and the LDC services waiver (allowing WTO members to provide better treatment to services and service providers from LDCs, without having to grant the same treatment to other WTO members). Unfortunately, the modest plan was shelved due to U.S. opposition, although some reduced elements of the package will still appear at the December Ministerial.

In advance of the Ministerial, it is important to note that the outsized claimed projections of potential gains from a Doha conclusion are gone by the wayside. In advance of other Ministerial meetings, WTO proponents have published grandiose projections of the increases to global GDP that would allegedly accrue as a result of a Doha conclusion. These projections have time and time again been exposed as tiny, shrinking, and unevenly distributed. This time, only a French think tank (CIREM-CEPII) published a study – commissioned by the EU – that used a modeling exercise to try to measure the global effects of the implementation of various Doha proposals. According to the study, the proposals on goods and services liberalization will actually cause the economies of Sub-Saharan Africa, Mexico, and the Caribbean to shrink (something which previous studies had also projected, a result which WTO proponents have sought to sweep under the rug).

In a review of this study, Public Citizen also noted that it was based on a seriously flawed methodology that included: failing to adjust for losses in tariff revenue; failing to “take into account the costs of adjustment when workers are displaced from employment in sectors harmed by greater imports”, and that the gains touted by the EU, and replicated in the Reuters coverage, were far beyond those contemplated in current proposals, and did not even appear in the actual study. In the end, the study’s predictions amounted to a paltry $152 billion in additional global GDP growth over the implementation of the agreement, a tiny sum given the long time horizon and global population. Even if it were divided equally across countries and people, Public Citizen quipped: “So, you can get the Doha Round and risk losing your job or you can get a Coke. Your choice.”

Post-Doha “New Issues”

But the major decision that will be decided at the Ministerial is the future of the WTO negotiations writ large. And here, things get a little complicated. While the Doha Round is currenltly at an impasse, governments have yet to officially abandon the Round – meaning that at any time, such as after suspensions in 2003, 2006, and earlier this year – negotiations could start again. Since a permanent shelving of the Round is by no means a foregone conclusion, civil society should remain vigilant.

Strangely, while the current proposals for the Doha Round are decidedly anti-development, it is the United States that has now become the primary opponent to concluding the Round. This is because the services, agriculture, and manufactured goods exporting corporations don’t think they’re getting quite enough out of developing countries, particularly from the “emerging market” countries.

Thus, the United States and other developed countries are instead putting forth a different set of issues for discussion at the Ministerial and beyond. Perhaps unsurprisingly, these so-called New Issues largely reflect the profit interests of the 1%. This includes “trade facilitation”, which is likely to facilitate more imports into developing countries than exports out of them. It also includes “environmental goods and services (EGS)” under the rubric of tackling the issue of “climate and trade.” Unfortunately, rather than focusing on removing WTO barriers to reducing climate change (such as excessive patent monopolies on green technologies), negotiating EGS has simply become another method through which major exporters can claim to be addressing climate change while actually just increasing trade, itself major cause of climate change.

One of the more pernicious proposals, put forward by Australia, would be a “standstill” commitment, under which countries commit to refraining from raising tariff levels above current levels, even within the increases currently allowed by the WTO. This standstill would be a devastating blow to those countries that have maintained the “policy space” of keeping a certain amount of flexibility that they currently have to protect their jobs and industries from import surges in a time of economic crisis.

And the EU, knee-deep in promoting investment agreements (those deals which give foreign investors “rights” in countries that in some cases exceed the rights of domestic companies) has also been working to include investment as an new issue – even though it was already dropped from the agenda in 2003 due to massive opposition by developing countries.

None of these proposals represent the development concerns of poor countries. Nor do they reflect the “Implementation agenda,” the list of 100+ fixes to existing WTO rules that developing countries fought hard to get on the agenda at the beginning of the Doha Round. Nor will they address the global crises of unemployment or food insecurity. Instead, rich countries have sought to “reframe” the future of the WTO negotiations around what US Trade Representative Ron Kirk euphemistically calls “21st Century issues.” Does this mean fixing the inadequate financial services disciplines? Or reining in subsidies to agribusiness which devastate small farmers? Of course not. It means dressing up all of the existing more-opportunities-for-corporate-profit wish lists of the 1% into a shiny new package.

Thus, when you hear developing countries calling for the continued negotiation of the Round, and a development-based conclusion to the negotiations, now you have the backstory. Better to keep in place a framework for negotiations that includes at least a mandate for development – even if that framework offers no possibility for a fair deal – and hope perhaps that it will never be concluded, than to veer completely off the rails to a “21st Century” deal so blatantly engineered solely for corporate profit.

The Future of the WTO

As negotiations for further expansion of WTO disciplines falter, cases being brought up by governments have increased. Many of these cases strike down popular consumer information, health, and safety laws that were passed by legislative bodies after consumer activism. Just in the last two months, the WTO ruled that American labeling of tuna as dolphin-safe was a violation of the WTO; that some U.S. rules designed to curb teen smoking are WTO-illegal; and that Country of Origin Labeling (COOL) of meat in the United States, passed by Congress to reduce exposure to contaminated food, is illegal under WTO rules. And these are just cases against the United States, the largest and most powerful economy in the world. Across the globe, research has showed that the WTO rules against challenged policies, including public interest regulations, 90 percent of the time. And now, both China and the United States are using the WTO to bring cases against each other’s green energy subsidies, at a time when human survival on this planet seems to depend on both countries radically transforming energy production.

And whatever the future of WTO expansion talks, it is the current WTO that still governs world trade. The emergence of the global financial, food, economic, climate, and other crises – which the WTO’s privatization and liberalization rules contributed to, and failed to prevent – provides an opportunity to reflect on the serious problems endemic to the particular model of globalization that the WTO has consolidated globally.

Thus, the OWINFS network has asserted that the global trade framework should provide countries sufficient policy space to pursue a positive agenda for development and job-creation, and that trade rules must facilitate, rather than hinder, global efforts to ensure food security, sustainable economic development, global access to health and medicines, and global financial stability.

In order to achieve these goals, many current WTO policies must be corrected and many aspects of any future negotiations agenda must be completely transformed. The network brought many of these proposals together in a Call to Action that was released in advance of the Ministerial meeting. The document calls on governments to protect jobs and industrial policy space by focusing on expanding employment rather than just cutting tariffs; to ensure that LDCs are able to utilize trade in pursuit of their development; to ensure greater flexibility within TRIPS for developing countries to address public health needs and access to sustainable technologies; to assess and then modify existing restrictions on financial regulation to ensure financial stability, and to forego demands for increased financial liberalization; to ensure that trade rules support food security and sovereignty, rather than continuing to treat food as a commodity to be manipulated by speculators; and many other demands.

These proposals would amount to a fundamental transformation of the WTO from an institution focused on codifying corporate “rights” to profit from trade, deregulation, and patent/copyright monopolies, to a rules-based system that disciplines corporate activity, in which countries would have the right and the ability to harness the benefits of trade for their own sustainable development.

Of course, this fundamental transformation of the framework of rules to discipline global trading corporations is a long way off in the current political climate. But the decision about whether the WTO will adopt a package of changes to help the poorest countries, move towards removing some WTO constraints on financial regulation, and begin to reflect on a transformed role for trade rules in the context of the global economic crises – or merely continue its 16-year agenda of consolidating a global corporate rights regime – will depend on the outcome of the decisions made by governments during this Ministerial. Civil society should help ensure that they make the right choice.

To ensure that governments understand the seriousness of the issues at stake, and the opportunity for alternatives to the narrow range of policy options currently being considered, a delegation of about 60 different trade unionists, farmers, church leaders, and consumer advocates from Argentina and Peru to South Africa and Zambia; from Belgium and the United States and Russia, to India and the Philippines, and yes, even Vanuatu, will travel to Geneva next week to work together through OWINFS and with the African Trade Network and the International Trade Union Confederation. They will be joined by local activists who will be setting up an Occupy the WTO tent during the conference, highlighting the importance of the negotiations for the 99% of the global population. Wish them luck.

 

Lori Wallach and Todd Tucker sound the alarm on the danger of three anti-consumer WTO rulings and the need to chart a path to a pro-consumer trade policy in an opinion piece in The Hill today:

Trade rulings undermine consumer protection

By Lori Wallach and Todd Tucker

“His name was Colin; here are his papers,” said the waitress presenting a bound prospectus to two diners who possess a limitless interest in the origin, diet and even friendship circle of the chicken they are about to order. The scene comes from Portlandia, the sketch comedy that skewers the bobo lifestyle.

Most of us aren’t quite so inquisitive about our food. But in an era of mass food-borne illness outbreaks, we do need retailers to provide basic information about our foods’ origins, and regulators to ensure the accuracy of these claims.

The country-of-origin labels we now rely on come from a 2008 law that ensures we know in which countries our meat was born, raised and slaughtered. The policy resulted from decades of consumer campaigning in response to slaughterhouses’ practices of routinely combining dozens of animals from diverse countries into the same hamburger patty, without having to even document the cattle’s origin.

Last month, the World Trade Organization (WTO) ruled that the law violated the global agency’s rules. A three-person tribunal in Geneva admitted that there was no strong evidence of quantifiable damage to Mexico and Canada, which challenged the law. Yet, if U.S. officials do not appeal or the appeal fails, the U.S. must weaken or eliminate the policy, or we face indefinite trade sanctions.

This is the third WTO ruling this year against popular U.S. consumer policies. The ban on candy and clove flavored cigarettes commonly used to hook teenagers and the dolphin-safe tuna labels instrumental in reducing fishing fleets’ killing of dolphins have also been declared WTO-illegal. All three policies represented a carefully constructed balance, attempting to protect consumers while minimizing compliance costs on businesses. In other words, the middle ground between Portlandia and The Jungle, Upton Sinclair’s famous slaughterhouse expose.

How did consumer information labels become violations of international “trade” agreements, which traditionally covered only tariffs and quotas? Multinational agribusiness and other corporations led a decades-long effort to use these agreements to categorize many consumer and environmental safeguards as forms of protectionism. Thus, most provisions in today’s “trade” agreements do not govern cross-border flows of goods, but rather constrain the non-trade policies nations may apply domestically.

Attacks on Flipper and the safety of the food in our homes can only intensify Americans’ skepticism of current trade policies. Polls show that trade-related job offshoring is among voters’ top concerns, while majorities of GOP, Democrats and Independents now view our trade deals as bad for their families and our nation. When President Obama pushed trade deals through Congress in October that contained similar anti-consumer rules, a record level of Democrats abandoned their own president.

Contrary to the rhetoric of the interests benefitting from these over-reaching agreements, the choice is not between the status quo or no trade. The question is what rules can deliver the benefits of expanded trade, while also providing our elected representatives the policy space to weigh and balance business and consumer interests to promote the public interest.

As the recent WTO rulings spotlight, the current rules are out of balance. This is not surprising, since they were established under a uniquely unbalanced negotiating mechanism known as Fast Track. This system expired in 2007, and greatly limited the role of Congress and the public. Meanwhile, it provided 600-plus corporate representatives with exclusive access to otherwise secret negotiating texts and to U.S. negotiators.

That old negotiating system and the agreements it produced may satisfy the one percent. But it does not deliver a right-sized trade policy to serve the rest of us.

Lori Wallach and Todd Tucker, director and research director of Public Citizen’s Global Trade Watch.

 

 

In the run-up to the congressional vote on the Korea FTA, the Obama administration claimed that its small tweaks to the Korea FTA's auto provisions would lead to greater exports of U.S. autos to Korea. The relaxation of Korean environmental and safety standards for imported U.S. vehicles was supposed to soften the blow of the clobbering that U.S. automakers would suffer when U.S. tariffs on Korea vehicles were lifted under the FTA. Trusting this claim, Congress passed the Korea FTA last month. Now Bloomberg is reporting that the tweaked auto provisions were all for naught:

When Back Seung Chul bought a new car in Seoul, he didn’t even look at imported models from General Motors Co. (GM), Chrysler Group LLC and Ford Motor Co....

Back’s decision -- he bought a Sportage R sports utility vehicle from Hyundai (005380) affiliate Kia Motors Corp. -- suggests that a new U.S.-Korea trade deal won’t mean a leap in sales in the Asian country for U.S. automakers, which accounted for just 1.1 percent of the market last year. The agreement, likely to take effect Jan. 1 after it was signed by President Lee Myung Bak in Seoul today, calls for the phasing out of South Korea tariffs on U.S. vehicles.

“It is highly unlikely American cars will do well in the Korean auto market,” said Kang Sang Min, a Hanwha Securities Co. analyst in Seoul. “Local automakers like Hyundai and Kia can make good cars and offer quick, convenient service.”

The article also discusses the widespread preference for fuel-efficient vehicles in Korea, since Koreans must buy gasoline at double the price of U.S. consumers. Somewhat ironically, the Obama administration's efforts to have Korea relax its fuel efficiency standards for imported U.S. vehicles will only solidify the negative perceptions of U.S. vehicles in Korea.

In sum, Koreans' preference for domestic vehicles over U.S. vehicles - not safety regulations - is the reason that sales of U.S. vehicles have lagged. We warned about this in our comments to the U.S. International Trade Commission (USITC) about the methodology that they would use to predict the impact of the FTA upon the U.S. auto sector. Even though the USITC did not adopt the modifications to their methodology that we recommended, its report still predicted that the annual U.S. auto trade deficit would rise by hundreds of millions of dollars under the Korea FTA. Although Bloomberg's reporting on this issue can be viewed as better late than never, it is certainly too late for the thousands of U.S. auto workers who will likely lose their jobs from the Korea FTA.

(Disclaimer: Public Citizen has no preference among candidates for office.)

With the budget and other scandals dominating political discourse, little space has remained for discussion of trade policy among possible presidential candidates.

To fill this void we decided to examine exactly where the politicians fall on key trade issues:

Bachmann
Although foreign policy hasn’t always been her strong suit, Rep. Michele Bachmann (R-Minn.) is pretty confident about her views on trade. Bachmann interrupted her presidential campaign and broke a streak of 88 absences to cast a vote in favor of the free trade deals with Korea, Colombia and Panama. In a press release she writes that these deals will “spur economic growth… without cost to taxpayers.” Notably, the representative voted against Trade Adjustment Assistance, which would provide support for workers displaced by the deals. Bachmann also voted against Fast Track cancellation in 2008 and in favor of the Peru trade deal in 2007.

In a blog post urging lawmakers to pass the Korea, Colombia and Panama trade deals, Bachmann writes that the “role of free trade as an expression of liberty….signifies the very principles our country was founded upon.” Unfortunately, these trade deals were negotiated under Fast Track, leaving Congress no authority to amend the agreements. (The constitution, or the document our country was actually founded upon, outlines a system of checks and balances granting Congress the power to “regulate commerce with foreign nations”).

Paul
A self-proclaimed proponent of free trade in its most pure form, Rep. Ron Paul (R-Tex.) opposes NAFTA-style trade deals because they erode U.S. sovereignty and are unconstitutional. He has voted against almost every trade deal that has surfaced during his tenure in office, including Peru, Oman, Bahrain, CAFTA, Australia, Singapore and Chile. Paul has also been an advocate of withdrawing from the World Trade Organization.

Paul didn’t show up to vote against the most recent trade deals with Korea, Panama, and Colombia, nor an earlier one with Morocco. His son Rand Paul, a Tea Party senator from Kentucky, voted in favor of all three, despite the fact that he campaigned on a platform opposing the WTO and NAFTA-style trade deals.

Perry
Gov. Rick Perry (R-Tex.), who has described himself as a “fair-trader” and a “free-trader” in the same sentence, has been a hard-liner for expansive trade policies.

Perry advocated for NAFTA as governor, and in a 2001 speech he praised the trade deal for its economic gains. He declared that it is a matter of “economic fact that free trade lifts the tide for all the boats in the harbor.” In 2003 and 2005 the governor signed letters binding Texas to government procurement rules for a variety of trade pacts.

In his 2001 speech he also demonstrated strong support for the NAFTA trucking program, calling it a “protectionist policy that forbids Mexican trucks from U.S. roadways.” He has come under fire for his unwavering support of the Trans-Texas Corridor, a $183.5 million pet-project funded by the corporation Cintra that would facilitate trucking trade between Mexico to the United States. The project elicited strong public disapproval and was eventually terminated.

Perry concedes that “our trade policies haven’t been working for families for years,” though his campaign platform does not seem to offer any suggestions for improvement.

Romney
Former Gov. Mitt Romney (R-Mass.) has made his commitment to “free” trade very clear. However, unlike most of his counterparts, he has pledged to hold China accountable. In an opinion piece appearing in the Washington Post, he lambasted the nation’s practice of currency manipulation:

“If I am fortunate enough to be elected president, I will work to fundamentally alter our economic relationship with China. As I describe in my economic plan, I will begin on Day One by designating China as the currency manipulator it is.”

In his 2010 book, Romney admits that trade hasn’t always been good for the American worker. On page 115 he writes:

“The case for trade makes good economic sense--trade improves the wages and standard of living for the average citizen. But trade can disrupt and devastate those individuals directly affected. Owners and shareholders may lose money, of course. But it is the employees and managers, from the shop floor to the drifting tables to delivery trucks, who take the brunt of the pain. Trade is good for the nation and for the average citizen, but it is decidedly not good for everybody.”

Nevertheless, his campaign promises include the creation of a “Reagan Economic Zone” to extend free trade policies worldwide, particularly in Asia. 

Cain
Earlier this year at the Conservative Political Action Conference, corporate-lobbyist turned politician Herman Cain refused to take a stance on NAFTA or CAFTA in an interview with blogger Jason Pye, but branded himself an advocate of fair trade policies:

“Uncle Sam has got to stop being Uncle Sucker. We don't need ‘free trade’ where other countries get   rich at our expense, but ‘fair trade’ where everyone plays by the same rules and everyone benefits.” (Full podcast here).

As chairman and CEO of the National Restaurant Association, however, Cain lobbied Washington on a variety of issues, including advocating against the increase of minimum wage and welfare reform, as well as policies of “free trade.”

According to Katrina Trinko of the National Review:

“[In 1994] he applauded the passage of the General Agreements on Tariffs and Trade (GATT),   which lowered tariffs, and pushed for its ratification. ‘Free trade is not a zero-sum game. Everyone    can benefit,’ Cain said, according to Nation’s Restaurant News.”

His website doesn’t offer any suggestions or trade policy proposals, but Cain has brainstormed ways to improve our relations with China: he suggests that we simply “outgrow them.”

Gingrich
Former republican Representative from Georgia Newt Gingrich voted in favor of many expansive trade policies during his time in office, including three votes to expand Fast Track Authority, a vote to uphold the trade deals of the Uruguay round, and votes in favor of establishing trade deals with Israel in 1985 and Canada in 1988.

In a seemingly bizarre twist, Gingrich voted against the Omnibus Foreign Trade and Competitiveness Act of 1998 which sought to expand Fast Track Authority. In the case of the Omnibus act, however, the Reagan administration urged Congress to vote against the bill as its labor and environmental standards were perceived as too progressive.

As Speaker of the House, Gingrich lobbied for NAFTA with the intensity of a “full court press,” working closely with then-President Clinton to ensure enough votes for passage. On a radio show earlier this year, Gingrich lauded the offshoring of jobs to Mexico, noting that he would rather have jobs “close to the United States” than elsewhere in the world.

Huntsman
On his website, former Gov. Jon Huntsman (R-Utah) boasts his “proven record” of aggressive trade policies, and points to some notable examples from his “decades of experience” including helping to negotiate trade agreements in Asia and Africa, expanding the market for American exports in Singapore and China, and intensely pursuing trade to double Utah’s exports as Governor.

Huntsman served as Bush’s Deputy US Trade Representative from 2001 – 2004. In his election speech he urged lawmakers to establish more “free trade” agreements and launch a new round of the World Trade Organization. As governor, Huntsman signed a letter binding the state of Utah to government procurement rules in the trade deals with Panama, Colombia and Ecuador.

In his jobs plan Huntsman promises to make “free trade” a priority as president and to “immediately pursue new trade opportunities with other nations, including Japan, India and Taiwan.” His campaign platform also includes initiative to finish the WTO’s Doha round and the Trans-Pacific Partnership (TPP).

Johnson
Former Governor Gary Johnson (R-N.M.)  has distinguished himself from other republican candidates through progressive stances on same-sex marriage, abortion rights, drug policy and immigration, but has yet to declare a firm position on trade.

In an interview with Reality Report TV, Johnson is vaguely critical of NAFTA, stating that he “cannot speak specifically to the advantages or detriment” of the trade deal, but believes that the criticism of NAFTA should be “rooted in the fact that big business became even bigger business.” He goes on to say that he would “like to think” that he would veto that kind of legislation was he president.

And although he has appealed to libertarian voters, he has not been an outspoken critic of trade deals like his counterpart Rep. Ron Paul.

Roemer
Former Rep. Buddy Roemer (R-La.) supported expansive “free” trade policies during his time in office, voting in favor of a trade deal with Israel in 1985, as well as the expansion of Fast Track Authority in 1988.

Now, vying for the Republican presidential nomination, Roemer has taken a remarkably different stance on trade. In an interview with Ian Fletcher at the Huffington Post, Roemer describes the Colombia, Panama and Korea free trade deals as “terrible.” He supports this statement with coherent arguments about Panama’s offshore banking problem, safety and human rights concerns in Korea, and political violence in Colombia. He also attacks the WTO with similarly well-versed critiques of sovereignty.

Appearing on the Thom Hartman Show in July, Roemer promises to take on corporate interests in the name of fair trade policies: “nobody has the guts to insist on fair trade, nobody has the guts to challenge China using child labor, using prison labor, using unfair standards. Nobody has the guts to challenge them. I will.”

Santorum
While in office, former Rep. and Sen. Rick Santorum (R-Pa.) voted in favor of  a slew of damaging trade policies, including expanding fast track twice, implementing Uruguay round trade agreements, and approving deals with Chile, Singapore, Australia, Oman and CAFTA.  Conversely, Santorum voted against NAFTA in 1993. In an interview with Fox News earlier this year, Santorum simultaneously defended his position and insulted Mexico:  

“I was not someone who supported NAFTA, as an example, because I thought that Mexico was, frankly, not going to be a particularly trustworthy trading partner at the time, and I think that proved out to be the case. NAFTA has been, at best, in my opinion, a wash.”

Santorum seems to miss the connection between corporate-backed trade deals and the race to the bottom.  In the same interview Santorum claims that “free” trade did not contribute to economic instability, but rather other country’s policies of cutting regulation and paying lower working wages has caused many of today’s financial problems.

Obama
As a Senator, President Barack Obama’s voting record is mixed. He voted against CAFTA, in favor of the trade deal with Oman, and did not vote either way on the trade deal with Peru [which he was reportedly in favor of]. During his presidential campaign, Obama took a decidedly stronger stance, and won many key swing states by pledging to create a “trade agreement for the 21st century,” which was to include strong environmental and labor standards. In 2008 he told voters “I voted against CAFTA, never supported NAFTA, and will not support NAFTA-style trade agreements in the future.”

Instead of fulfilling his campaign promises, President Obama pushed three Bush-negotiated trade deals through Congress, despite record numbers of opposition from his own political party. This included deals with Korea and Colombia that are projected to cost over 200,000 jobs at a time of substantial unemployment.

Now the Obama administration is working behind closed doors to negotiate the Trans-Pacific Partnership (TPP), another corporate-backed trade deal.

As we noted last week, the WTO has just issued a major ruling against U.S. country-of-origin labels (COOL) on meats. The decision confirms the direst predictions when the WTO was established, which questioned the wisdom of setting internationally binding rules against consumer protection.

The ruling and its six supporting annexes are hundreds of pages long, so going through all of them will take some time. Here are some additional items that we did not include in our longer analysis from Friday.

COOL is hearted by consumers

COOL is very popular, as the Obama team noted during the proceedings:

Numerous polls also indicate strong consumer support for mandatory country of origin labeling. Among the polls cited in various submissions received by USDA during the regulatory process are the following:

• 92 percent of respondents in a 2007 Consumers Union poll believed that imported foods should be labeled with their country of origin
• 88 percent of respondents in a 2007 Zogby poll indicated that they want all retail foods labeled with country of origin information
• 95 percent of respondents in 2007 Zogby poll indicated that they have a right to country of origin information for food
• 82 percent of respondents in a 2007 Food & Water Watch poll supported mandatory country of origin labeling
• 82 percent of respondents in a 2004 nationwide poll conducted for the National Farmers Union supported country of origin labeling
• 86 percent of respondents in a 2002 survey for Packer magazine supported country of origin labeling

However, the panel didn’t explicitly mention these polls. Throughout much of the proceedings, it was treated as an open question whether consumers actually wanted COOL.

Democracy is impermissibly uncertain; hortatory is the new mandatory

This WTO decision is the most recent of three cases with deeply troubling implications for consumers. In September, the WTO also ruled against U.S. efforts to reduce teenage smoking and dolphin mortalities. In the dolphin case, the purely voluntary dolphin-safe labeling scheme was deemed “mandatory,” despite the fact that tuna not having the label was and is sold in the U.S. After that ruling, we joked that “voluntary is the new mandatory.”

But this COOL ruling takes this joke to sad new levels, so that “hortatory is the new mandatory.”

Here’s why.

As noted, the COOL law represented a balance between corporate and consumer interests. Many consumer groups thought that the concessions went too far. In a (fairly cheap) nod to consumer concerns, Obama’s Agriculture Secretary Tom Vilsack wrote a letter to industry in February 2009 that stated the following...

Though it is important for the COOL Final Rule to go into effect in a timely manner and for the rule to proceed with the March 16, 2009, implementation date, there are certain components of the Final Rule promulgated by the previous administration that raise legitimate concerns.

In particular, I am concerned about the regulation´s treatment of product from multiple countries, exemption provided to processed food, and time allowances provided to manufacturers for labeling ground meat products. In light of these concerns, I am suggesting, after the effective date of the final rule, that the industry voluntarily adopt the following practices to ensure that consumers are adequately informed about the source of food products….

Labeling of product from multiple countries of origin

In order to provide consumers with sufficient information about the origin of products, processors should voluntarily include information about what production step occurred in each country when multiple countries appear on the label. For example, animals born and raised in Country X and slaughtered in Country Y might be labeled as “Born and Raised in Country X and Slaughtered in Country Y”. Animals born in Country X but Raised and Slaughtered in Country Y might be labeled as “Born in Country X and Raised and Slaughtered in Country Y”…

Processed Foods

The definition of processed foods contained in the Final Rule may be too broadly drafted. Even if products are subject to curing, smoking, broiling, grilling, or steaming, voluntary labeling would be appropriate…

Inventory Allowance

The language in the Final Rule allows a label for ground meat product to bear the name of a country, even if product from that country was not present in a processor´s inventory, for up to 60 days. This provision allows for labels to be used in a way that does not clearly indicate the product´s country of origin. Reducing the time allowance to ten days would limit the amount of product with these labels and will enhance the credibility of the label…

The Department of Agriculture will be closely reviewing industry compliance with the regulation and its performance in relation to these suggestions for voluntary action. Depending on this performance, I will carefully consider whether modifications to the rule will be necessary to achieve the intent of Congress

This a pretty cheap date as far as consumers are concerned – nothing binding at all.

But Mexico and Canada successfully challenged the mere writing of this letter as a violation of the WTO’s General Agreement on Tariffs and Trade (GATT). As the panel wrote,

…we do not find any justifiable rationale for suggesting stricter labelling practices than the ones required by the 2009 Final Rule (AMS) while at the same time allowing the 2009 Final Rule (AMS) to enter into force. If anything, the suggestions in the letter – even if they concern voluntary action by industry – undermine the labelling requirements in the 2009 Final Rule (AMS). In fact, the letter addresses issues that do not directly emanate from the actual labelling requirements at issue under the 2009 Final Rule (AMS). Importantly, this is done in the very same letter announcing the entry into force of the 2009 Final Rule (AMS) as a result of Secretary Vilsack's having reviewed it. Although the suggested actions in the letter are only for voluntary action, the language of the letter may still have caused uncertainty and confusion as to the consequences of the letter, including possible modifications to the 2009 Final Rule (AMS) should the industry not follow Secretary Vilsack's suggestions for additional voluntary action.

7.860 Furthermore, the Vilsack letter was issued less than one month prior to the entry into force of the 2009 Final Rule (AMS). This may have caused further confusion for industry in terms of the specific labelling requirements to be observed. In particular, what we are addressing here is a letter issued by the head of a government agency to the industry in general. Compared to situations where the administration applies the COOL measure to particular individual entities, this type of letter can, in our view, have a broader impact on the industry because the letter was issued to the industry in general, not to specific entities.

7.861 Although, in general, a WTO Member has the discretion to administer its laws and regulations in the manner it deems fit, it equally has the responsibility to respect "certain minimum standards for transparency and procedural fairness" as regards its actions. As the Appellate Body observed, Article X:3(a) of the GATT 1994 establishes certain minimum standards for transparency and procedural fairness in the administration of trade regulations.

7.862 This responsibility, in our view, applies to all types of actions falling within the broad scope of the term "administer" under Article X:3(a). We consider that the Vilsack letter did not meet these minimum standards of procedural fairness in relation to the implementation of the 2009 Final Rule by both allowing the 2009 Final Rule (AMS) to enter into force and, at the same time, suggesting industry compliance with stricter labelling requirements than those contained in the 2009 Final Rule (AMS).

7.863 Based on the manner in which the Secretary of Agriculture addressed the decision to implement the 2009 Final Rule (AMS), taken together with the circumstances under which the letter was issued, we consider that the Vilsack letter was not "appropriate", and thus does not meet the requirement of reasonable administration of the COOL measure within the meaning of Article X:3(a).

7.864 We therefore conclude that Canada has demonstrated that the United States acted inconsistently with Article X:3(a) by failing to administer the COOL measure in a reasonable manner through the issuance of the Vilsack letter.

The implications for political freedom of speech are huge. In any democracy, a new administration is likely to put a political spin on the actions of the previous administration, without necessarily or immediately undoing everything that came before them. They’re also likely to try to appease stakeholders without starting all-out wars with business. Under the WTO ruling, non-binding political speech can wind up costing trade sanctions.

This also just echoes so much of the idiotic corporate rhetoric around uncertainty, as Media Matters documents. Uncertainty is a fact of life – it typically will not explain economic phenomena. It is troublesome to democracy that so-called “trade” rules would make it a right to face a completely certain business environment.

Importers complain about concession to them

The 2008-09 COOL law represented a hard-fought balance. On the one hand, you had consumer groups, who were pushing for as much information as possible. On the other hand, you had slaughterhouses and importers, who demanded and got some concessions.

One of the concessions to business on ground beef labeling was that a company could have pre-made labels describing all the potential countries of origin of their meat, based on meat that might have been in their inventory in the past 60 days. This obviated the need to be constantly shifting labels. (see pages 109-111 of the panel ruling).

However, the complainants (Mexico and Canada) cited that this flexibility for why the measure violated Article 2.2 of the WTO’s Agreement on Technical Barriers to Trade (TBT).

As the EU notes in its third party comments,

It seems to us that the objective of the measure might fairly be stated to be informing consumers whilst at the same time avoiding unnecessary costs for importers. Furthermore, it appears to the EU that the 60 day flexibility is an aspect of the measure that is designed to reasonably accommodate the interests of importers. For the importers to attack it appears both to ignore the mixed nature of the measure's objectives, and to be at least potentially counter-productive.

Unfortunately, the WTO panel sided with the complainants:

… the COOL measure allows the ground meat label to list "all of the reasonably possible countries of origin of … ground beef [or] … pork" and to reference a country of origin even if the processor has not had ground meat from that particular country in its inventory for the last 60 days or less. Because of this so-called "60-day inventory allowance" in the 2009 Final Rule (AMS), the ground meat label is likely to convey inaccurate origin information as a processor may use the same label for all of its ground meat listing all countries of origin of the ground meat that the processor has had in its inventory at least for 60 days. In other words, an origin label affixed on ground meat could be listing a country name of meat that the processor might not even have used to produce the specific ground meat in that package. In fact, the Vilsack letter contains a statement confirming this: "[t]his provision [60-day inventory allowance] allows for labels to be used in a way that does not clearly indicate the product's country of origin".

7.707 Therefore, for the reasons explained above, the labelling under the COOL measure in our view provides information on meat with regard to the possible, but not necessarily actual, or for that matter accurate, origin as defined by the measure…

Further, the United States created exceptions and added flexibility into the regulations because the United States strived to reduce the costs of compliance, and it wanted to provide as much consumer information as possible. The United States argues that it had to strike a balance between providing consumer information and reducing the compliance costs for industry. Of course, it is often necessary and important for governments to take conflicting interests into account in implementing laws and regulations to fulfil policy objectives. The act of balancing conflicting interests cannot, however, justify any inconsistency found in the impugned measure with the obligations of the respondent under the covered agreements. In the factual circumstances of the present dispute, the pertinent question for us is whether the COOL measure is fulfilling the identified objective in accordance with the obligations under Article 2.2 of the TBT Agreement…

We acknowledge that labels required to be affixed to meat products according to the requirements under the measure provide additional country of origin information that was not available prior to the COOL measure. We also agree that the labelling requirements under the COOL measure may have reduced consumer confusion that existed under the pre-COOL measure and USDA grade labelling system.

7.718 However, we agree with the complainants that origin information on labels as prescribed by the measure does not ensure meaningful information for consumers…

7.719 We therefore conclude that the COOL measure does not fulfil the identified objective within the meaning of Article 2.2 because it fails to convey meaningful origin information to consumers.

As we noted in last Friday’s post, this is very much a damned if you do, damned if you don’t situation.

WTO allows you to quibble over what you can’t quantify

Mexico and Canada were at best lazy and at worst inept at proving that the COOL had a clear, consistent and demonstrable impact on their trade.

The panel examined eight sets of numbers on total imports of livestock from Canada and Mexico, but only half of them show a decline in imports starting in 2008, the year that COOL was implemented. For instance:

• Data provided by the U.S. indicates that imports of Canadian cattle in Jan-Sept 2010 increased slightly over the same period in 2009, but the panel declares that there is no clear trend in 2010 trade.
• Data presented by the U.S. and Mexico shows that imports of Mexican cattle declined in 2007 and 2008, but rose in 2009. U.S. imports of Mexican cattle stood at about one million head in 2009.
• Data presented by the U.S. and Mexico indicates that imports of Mexican cattle rose significantly between Jan-July 2009 and Jan-July 2010.
• The share of Mexican cattle in U.S. slaughter declined in 2008 and then rose in 2009. In 2009, the share stood at 5.0%.

Other data showed distinct trends over different time periods, but didn’t necessarily account for outbreaks of animal illness or recession that may have also negatively affected import levels.

The panel then moves onto trying to tease out evidence of import decline from competing U.S. and Canadian statistical studies, and declares the Canadian results more valid even though the contradictory results just depend upon which variables are considered important.

So, how can discrimination be shown without evidence?

I’ve got a feeling that neoliberals have a way around this in the long term, because it must be pretty embarrassing to have so little good evidence. It’s called regulatory coherence or cost-benefit analysis. In the proposed Trans-Pacific trade deal, for instance, the Obama administration is pushing countries to engage in detailed analysis of how regulations impact trade. As my colleague Jane Kelsey has noted,

Cost benefit analysis involving quantitative assessment of competing interests may indicate costs to an investor for which the government does not compensate. At present, the complainant bears the burden of proof in an investment dispute and has to mount its own argument using the information it can piece together. The [Obama proposal] could provide evidential material that has been prepared by the government itself, either as evidence to support a complaint or as an evidential basis for the dispute.

(HT to Public Citizen researcher Travis McArthur.)

Europe is Consumer Advocate #1

The Obama administration didn’t use all the legal quivers of arguments in its arsenal, as we noted last week. In this regard, it is instructive to read some of the impassioned defense of the COOL law by the European Union, who repeatedly notes arguments that the U.S. did not raise in its defense. For instance,

The European Union recognizes that origin labelling might also facilitate choices by consumers. Depending upon one's perspective, one might consider some of these choices to be rational and in harmony with the WTO agreements, or one might consider some of these choices to be irrational or economically inefficient. For example, choices might reflect actual or perceived risk associated with food from a particular region or Member; or actual or perceived positive qualities of food from a particular region or Member; or ethical considerations about a particular region or Member; or a desire to foster sustainable development in a particular region or Member; or a desire to economically support a regional or domestic industry; or considerations of taste and personal judgment. One cannot hope to have perfect information about why such choices are made – that is the whole point of the label – it empowers the consumer.

13. The European Union might have an issue with measures adopted by a Member that would initiate, encourage or amplify such choices in a manner that would be inconsistent with the covered agreements. However, the European Union does not consider that the covered agreements set out to preclude origin labelling in itself, nor the making of such choices by consumers, nor that they could hope to do so effectively in the long term. If it is true that one of the basic objectives of the WTO is to facilitate the operation of market forces in the global economy, it is equally true that consumers are the market, it being up to firms to persuade consumers to prefer their products. One could hardly imagine firms being precluded from identifying products as their own. From this perspective, origin labelling may not be obstructing market forces, but facilitating their operation.

14. The essential difference between voluntary and mandatory labelling is that an individual consumer in a supermarket is hardly in a position to demand labelling with respect to particular information. They are only able to do that through organisation, notably through their domestic political processes. Thus, if a domestic political process leads to mandatory origin labelling, that may reasonably be taken as an indication that consumers want it, so that they are in a position to make the kinds of choices outlined above.

This vision of regulation is informed by sound social science. Too bad that the WTO panel decided to chuck that overboard, along with democracy and consumer protection.