Trade News for State & Local Officials

Winter 2008

Happy New Year!

Last year, numerous states took extraordinary action to weigh in on the future of U.S. trade policy - from passing resolutions calling for replacement of the undemocratic "Fast Track" trade negotiating system with a process providing states an enhanced role to implementing new legislative "prior informed consent" procedures to improve federal-state consultations on whether states would be bound to procurement and other non-tariff provisions.

As problems with dangerous imported food and products top the headlines, and investments and jobs - in both manufacturing and the services sector - continue to be shifted offshore under our current "trade" pacts, state legislatures across the country have increasingly pushed their way into the debate about new American trade and globalization policies that can harness the benefits of trade while preserving the systems of federalism and checks and balances vital to our democracy.

State and local officials have an important role to play in advancing a new framework for trade agreements and trade policymaking that can earn nationwide support from the public. Here's what's going on in 2008.

WTO Gambling Case Update: Did USTR Make a Losing Deal?

After years of state and local officials voicing their concerns (PDF) over the 2005 WTO ruling on gambling regulation, the U.S. Trade Representative (USTR) finally announced in 2007 that it would begin the process of removing the gambling sector from WTO (World Trade Organization) control, fulfilling a longtime demand of state and local officials. Under the restrictive WTO rules, however, a country may remove service sectors from its commitments to the General Agreement on Trade in Services (GATS) only after other WTO countries have the opportunity to obtain compensation (for the prospective market loss caused by the United States reasserting its rights to regulate a service sector).

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 recently announced a compensation deal with the EU and other WTO member countries that would expand U.S. WTO GATS commitments to additional sensitive service sectors. Plus, USTR is moving to do so without submitting this proposal for congressional approval, setting a dangerous precedent of executive branch overreach given the Constitution gives Congress exclusive authority to set the terms of U.S. commerce with foreign nations.

USTR proposed to add to WTO jurisdiction certain U.S. postal services as well as research and development, storage and warehouse services, and testing and analysis services. USTR says these new WTO commitments are of no concern because these sectors were already "liberalized" under U.S. law. However, by submitting them formally to WTO jurisdiction, USTR would limit the right of a future Congress or state legislatures to implement many foreseeable policy actions in these sectors. The storage and warehouse service sector could include controversial liquefied natural gas terminals, as well as chemical tank farms. The countries to which USTR has made this offer have until the end of January to decide if they will accept this deal or ask for WTO arbitration. Read our press release on the compensation package.

Write a letter to the USTR and request that no new service sectors under state and local regulatory authority be submitted to WTO jurisdiction, without a review by federal and state policymakers. For more information, contact Saerom Park.

News from Washington: A Majority of the Majority Opposed the Peru NAFTA Expansion

In November, President Bush's Peru NAFTA-expansion agreement was brought to a vote in Congress, nearly four years after the start of negotiations. Despite intense pressure and lobbying from a massive corporate coalition and the White House, a majority of Democrats in the House of Representatives opposed the deal, as did 12 of the 18 committee chairs and 3/4 of the House Democratic freshmen. Seven of nine Senate Democratic freshmen also voted no on the December Senate vote. (See how your congressman voted here). With nearly every Republican voting yes, the deal passed. Fortunately, only eight states are signed on to the restrictive procurement provisions of the Peru FTA, compared to 19 for CAFTA and 30 for the Australia FTA. (Find out if your state is bound here).

Although it passed, that a majority of Democrats opposed it shows that the Peru FTA is not an acceptable framework for future trade deals. In May 2006, some Democratic congressional trade leaders made a deal (PDF) with the Bush Administration to add improved labor and environmental standards to four Bush-negotiated NAFTA expansion agreements. The deal, which was done without consultation, much less consent, of the Democratic Caucus or outside groups deeply involved in trade justice, was dubbed a "new template" for future trade agreements. Although the improved labor and environmental standards certainly should be included in all future deals - and strengthened further - the deal left unaddressed the core NAFTA-CAFTA foreign investor, procurement and service sector rules that have been at the center of states' concerns.

The Peru NAFTA expansion agreement, as well as those with Panama, Colombia and South Korea, include the same NAFTA-CAFTA procurement language that undermines state regulatory authority, and even expand on CAFTA's extreme foreign investor rights and investor-state enforcement tribunals - even as the United States faces new foreign investor challenges to state and federal public interest laws under similar NAFTA terms.

The proposed NAFTA expansion agreements also include the NAFTA-CAFTA incentives that promote offshoring and remove most risks of doing business in a developing country by guaranteeing U.S. firms that relocate a "guaranteed minimum standard of treatment" in low wage countries and a way around local court systems. The pending pacts also expose an array of U.S. state and federal environmental, food safety and health laws to challenge in foreign tribunals; empower foreign corporations to skirt Buy America and anti-off-shoring policies; and provide Big Pharma with extended patent rights that undermine affordable access to medicine in our developing country trade partners. The Peru NAFTA expansion potentially even empowers U.S. firms, such as Citibank, to demand compensation if Peru were to reverse its disastrous social security privatization.

It's not surprising that not a single U.S. labor, environmental, consumer, faith, family farm or development group supported this agreement. It was also opposed by both of Peru's labor federations and its major indigenous people's organization. That a majority of the party in charge opposed the Peru NAFTA expansion - theoretically the least controversial of the remaining trade deals - means that in all likelihood, the NAFTA expansions to Panama, Colombia or South Korea will not pass through Congress this year. Indeed, after considerable outrage over the deal expressed by House Democratic Caucus members, Speaker Nancy Pelosi and her leadership team announced in June, well before the vote, that they opposed the Korea and Colombia agreements and did not plan on providing President Bush with further Fast Track trade authority.

Look to States to Lead the Way in 2008

The divisive Peru NAFTA expansion vote echoed the widespread discontent with the status quo trade policy. The vote demonstrated that many of our representatives in Congress get it: what determines the effects of a trade agreement is not mainly the economic size of the country involved but instead, the scope of the extraordinary corporate rights established under the agreement - rights that undermine U.S. domestic and foreign policy goals.

On many issues, states are leading the federal government in coming up with innovative solutions to tough problems - health care, climate change and education to name a few. The same can be true for trade policy. If state and local officials are at the forefront this year in ensuring that the next trade debate in the Congress will be about how to create a truly new template for future trade agreements that benefits the majority of Americans and includes state and local officials in the trade negotiating process, the odds for real change in 2009 will be greatly enhanced.

Let's begin the conversation about how you can play a role in these critical future decisions. To be ready for 2009 when a new president will surely seek trade negotiating authority and an array of pending agreements will again come to the forefront, we must start today. Meaningful consultation between the federal trade negotiators and state policymakers will only happen if you demand it. To join the network of state and local officials working to create a winning new trade policy that safeguards state sovereignty and democracy in trade agreements, 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

National Conference of State Legislatures (NCSL) Passes a New Policy on Free Trade and Federalism

At the last NCSL annual meeting in August, state legislators overwhelmingly voted to renew the Free Trade and Federalism policy with substantial modifications, reflecting the concerns of state legislators across the country that our current trade policy undermines traditional areas of state regulatory authority and fails to include state and local officials in meaningful trade policy discussions.

Read the new NCSL policy position here.


Hawaii and Rhode Island Pass Legislation to Safeguard State Laws Threatened by Trade Agreements

Again proving that states serve as our nation's laboratories for policy innovation, last year several states acted to enhance their consultations with federal trade officials by implementing forward-thinking new approaches to reviewing federal requests to bind a state to trade agreements' non-tariff regulatory constraints:

  • Last July, Hawaii joined Maryland and Rhode Island in implementing a mechanism that requires legislative approval in order for the state to be bound to comply with the procurement terms of future trade agreements. Read our press release.
  • In October, Rhode Island overrode a governor's veto to become the first state to establish a "prior informed consent" mechanism with legislative review of the non-tariff terms of "trade" agreements, including procurement, services and investment provisions. The new law sends a message to Congress and to the USTR that state and local officials are demanding greater accountability over federal trade negotiators. Read our press release.

Demand a voice for your state in the U.S. trade debate. Contact Sehar Raziuddin at (202) 454-5193 for more information.


Worried about the Safety of our Imported Foods and Products?

Two new reports in 2007 documented the impact of "trade" agreements on our food and product safety. Trade Deficit in Food Safety outlines how many U.S. trade agreements, including the pending Panama, Colombia and South Korea agreements, limit inspection and safety standards the United States can require for imported foods.


Watch the CNN report.


Santa's Sweatshop: Made in D.C. with Bad Trade Policy reveals how toy companies increasingly have offshored production to countries where the safety of their products could not be guaranteed - leading their profits to soar at the expense of children's safety. Unfortunately, instead of fixing the root causes of the imported product safety crisis, Congress has failed to remedy the trade policies these companies pushed (which limit the safety standards and inspection and promote offshoring) or to enact measures to ensure the safety of imported products in the current attempts to reform the Consumer Product Safety Commission.


Find out what we can do to stop toxic trade. (PDF)


Tell a Colleague

The State of Global Trade is a low-frequency newsletter for state and local officials. Help spread the word.

If you do not wish to receive e-mail messages from Public Citizen in the future, please click here.

Copyright © 2007 Public Citizen. All Rights Reserved
215 Pennsylvania Ave. SE, 3rd Floor
Washington, DC 20003