Fast Track Expires, Thanks in Part to States' Demand for a New Direction on Trade
On June 30th, 2007, the current grant of President Bush's "Fast Track" trade authority - the undemocratic Nixon-era law that transfers Congress' constitutionally-mandated control over U.S. trade agreements to the White House - expired. Although President Bush and the special interests granted a preferential role in U.S. trade policymaking by Fast Track had urged Congress to enact a new Fast Track delegation, broad demands for a more democratic, inclusive process for trade negotiations won the day.
From city councils to state legislatures, state and local authorities in every corner of the country have pushed resolutions demanding a new role in the trade-negotiating process that allows states to consider how the non-trade regulatory constraints in these agreements impact state regulatory authority and sovereignty before they are bound to comply. Reflecting the broad interest of state and local officials to replace Fast Track once and for all, over a dozen of these resolutions passed this year (see sidebar for a complete list).
As the sunset of Fast Track loomed, state and local officials across the country worked hard to seize this opportunity to voice their support for a new trade negotiating mechanism that is democratic and accountable. Specifically, state officials have expressed the need for a guarantee that the federal government will obtain states' explicit approval - their prior informed consent - before domestic state laws and policies are subject to scrutiny under international trade agreements.
State legislators have also been working to pass bills that ensure the state legislature has the power to decide if their state will be bound to the procurement terms of "trade" agreements. While Rhode Island's bill was ultimately vetoed by Governor Carcieri this year, Hawaii was able to override Governor Lingle's veto to enact their bill into law, becoming the third state along with Maryland and Rhode Island to pass this cutting-edge legislation.
World Trade Organization (WTO) Challenge to U.S. Gambling Regulation Update: United States Trade Representative (USTR) Moves to Remove Gambling from WTO Jurisdiction
After years of state and local officials voicing their concern over the 2005 WTO ruling on gambling regulation, the USTR finally announced it would fulfill state and local officials' longtime demands and began the process of negotiating to remove the gambling sector from WTO control. Under WTO rules, a country may only remove sectors from its commitments to the General Agreement on Trade in Services (GATS) if all other WTO countries have the opportunity to seek compensation for the loss of the withdrawal from the service "market."
That USTR is finally acting to remove the gambling sector from WTO control is a great victory for state sovereignty. The fact that USTR's long overdue action has triggered major demands by other countries for compensation under WTO rules - for example, $3.4 billion by Antigua and Barbuda alone - highlights how the Fast Track system has enabled a series of trade pacts that undermine the public interest. Read our press release here.
Despite the growing evidence that subjecting a highly regulated sector such as gambling to comply with WTO rules was a colossal and costly mistake, the USTR has refused to reply to state and local officials' demands that it consider removing other important areas of state regulatory authority from WTO control, including higher education and health care. While the Doha Round of WTO expansion talks remain largely deadlocked, negotiations on these specific service sector issues are continuing on the side. Read our new memos on how these WTO talks can affect state authority over higher education and health care.
News from Washington: Final Text of May 10 Trade "Deal" Released
On May 10, in a surprise news conference late in the day, Democratic House Speaker Nancy Pelosi joined the White House and congressional Democrats and Republicans in charge of the trade committees to announce a "deal" to move several "Free Trade Agreements" (FTAs) negotiated by President Bush. The deal came as a surprise to most, as it was reached without consultation or consent from state officials, interested outside groups or even with most members of Congress.
On June 25, less than a week before Fast Track was set to expire, the modified legal texts of the four trade agreements - North American Free Trade Agreement (NAFTA) expansions to Peru, Panama, Colombia and South Korea - covered under the deal were released. Earlier in the year, various members of Congress and civil society groups also listed the minimal changes needed to "de-NAFTA-ize" the Bush-negotiated trade deals so as to ensure that minimally the deals would do no harm. The legal text of these agreements unfortunately confirms that the essential changes listed by labor unions, environmental, consumer, faith and family farm groups as necessary to avoid their opposition to the trade pacts were not made.
The goods news is that greatly improved labor and environmental standards were added to the agreements, although unfortunately the enforcement of these provisions would rely on President Bush taking actions he has not been inclined to undertake in the past. Some of the worst provisions undermining access to affordable medicine were removed; however, the agreements still include limits on medicines access that undermine rights provided under the WTO.
Unfortunately, these improvements were added on top of the core NAFTA-Central America Free Trade Agreement (CAFTA) provisions, which were not addressed. Issues not addressed by the "deal" include the trade agreements' ban on "Buy America" and anti-offshoring laws, and threats to recycled content, renewable energy, prevailing wage and other common domestic procurement policies. Also unaddressed was the FTAs' foreign investment chapters which replicate the investor-state private corporate enforcement system and in some instances extend beyond the extraordinary foreign investor privileges contained in NAFTA and CAFTA.
The new legal texts do not alter a single word of the foreign investor rules that create incentives for U.S. firms to move offshore and expose U.S. environmental, health, zoning and other laws to attack in foreign tribunals. These rules in NAFTA have resulted in nearly 50 challenges of federal and state laws, leading to over $36 million in taxpayer funds from NAFTA nations paid to corporations. The United States has spent millions in legal costs to defend against such attacks. Also missing altogether is any remedy for the restrictive service-sector rules which contribute to the erosion of state regulatory authority in the United States. The new texts also failed to fix provisions that could subject Peru to compensation demands by providers of private retirement accounts if the nation decides to reverse its failed social security privatization.
Much more work remains to be done to ensure that future U.S. trade agreements exclude the NAFTA and WTO-style rules that that undermine state regulatory authority and sovereignty. The revised agreements have failed to attract support from a single union or environmental, consumer, anti-poverty, development, health, faith or small business group. The Democratic congressional trade leaders who support the proposal note that perhaps only 50 to 70 of the 232 House Democrats will support the agreements, thus allowing the FTAs to be passed by a majority of the GOP minority, and a minority of the Democratic majority.
Votes on the Peru and Panama pacts could occur as soon as this September; however, how the situation will play out remains unclear. The Democrats who won the improved labor and environmental standards have insisted that the changes needed to implement these gains be completed before Congress votes on the pacts. The Bush administration has the right to force votes under Fast Track, which still applies to these last four pacts, regardless of the wishes of the House Speaker and Senate Majority Leader.
With the sunset of Fast Track and the unprecedented activity on the state level to reform U.S. trade policy, state and local officials now have a critical opportunity to create basic guidelines for a new trade-negotiating process that creates a formal role for states in order to ensure meaningful consultation and revitalize democracy and federalism.
To join the network of state and local officials working to safeguard state sovereignty and democracy in trade agreements, or to learn more about the pending NAFTA expansion FTAs, please contact Saerom Park at 202-454-5127 or Sehar Raziuddin at 202-454-5193.
Thanks for all that you do!
Public Citizen's Global Trade Watch