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Spring 2010 E-Newsletter

Spring '10

Federalism At Stake

Newsletter Headlines:

  • NCSL Trade and Federalism Policy on the Line at April Meeting!!
  • Provision in Federal Financial Reregulation Bill Preempts State Insurance Regulations that Conflict with Trade Agreements!
  • Will USTR Consult with States During the TransPacific Partnership Negotiations- Obama's First Potential Trade Deal?

NCSL Trade and Federalism Policy on the Line at April Meeting!!

In 2007, state legislators passed NCSL's comprehensive Free Trade and Federalism policy - a critical policy that set out a new direction for NCSL on trade. The policy calls for a greater state role in the U.S. trade policymaking process, the right for states to be able to opt in to non-tariff policy constraints on procurement and changes to the past foreign investors rules and their private enforcement. The policy also states that NCSL could only support future presidental trade authority if the president delivers on this reform agenda.

This NCSL policy has been used time and time again to represent state interests with federal lawmakers and has prompted federal legislators to prioritize federal-state consultation within congressional trade reform proposals, such as the Trade Reform Accountability Development and Enforcement (TRADE) Act.

Under NCSL rules, this important Free Trade and Federalism policy is up for renewal or expiration in 2010. The new Labor and Economic Development Committee Chair Juan Zapata (R-Miami) has placed this matter on the agenda for the Washington D.C. spring meeting which will occur April 8-10.

Chair Zapata has released his proposed changes which would strip the following safeguards from the current policy:

  • Elimination of almost the entire section on improving state-federal consultation on trade agreements (lines 172-207);
    - Elimination of section on consultation with states on trade
    matters to ensure legislators are aware of any state laws,
    policies or programs that may be impacted by trade
    agreements (lines 165-170);
    - Elimination on section on consultation regarding services
    (lines 254-258);
  • Elimination of section on conditioning NCSL support for future presidential trade authority on reforms being met;
  • Elimination of text on states retaining the ability to safeguard their policy space by adjusting their commitments on procurement, services and investment (lines 57-61);
  • Elimination of section on states having a formal, federally-recognized role in defending challenged state laws before trade tribunals (lines 116-123); and
  • Elimination of NCSL endorsement for use of GATS Article XXI (requiring compensation for changes to a state's service sector regulatory constraints) to withdraw GATS commitments (line 285).

Join the debate at NCSL!

The decision about the future of the Free Trade and Federalism policy is set for Friday, 4/09/10 during the NCSL's Labor and Economic Development Business Committee meeting. Make sure the legislators representing your state know the significance of the proposed eliminations. Please contact Sarah Edelman for more information.

Buried Provisions in Senate Financial Reregulation Bill Would Newly Empower Treasury to Preempt State Insurance Policies that Conflict with Trade Pacts!

Even though the regulatory failures that caused the financial crisis can be traced to federal agencies, the U.S. Senate financial regulation bill, "Restoring American Financial Stability Act of 2010," (ostensibly aimed at reregulating financial firms) includes provisions that could undermine state regulators and existing state insurance policies. The financial reregulation package just passed out of the Senate Banking Committee contains measures that would newly empower the Treasury Department to unilaterally determine that state insurance rules violate international agreements and preempt such state policies.

The latest version of the Restoring American Financial Stability Act of 2010, sponsored by Sen. Christopher Dodd (D-Conn.), calls for the establishment of a new Office of National Insurance (ONI) within the Department of Treasury that would be granted bold new preemption authority with respect to state insurance policies. This new agency would be empowered to negotiate international agreements on insurance, enter into these agreements without congressional authorization and preempt state insurance policies that the Treasury unilaterally determines conflict with the terms of international agreements. Effectively, this proposal would create a new ceiling on state regulation based on international standards the new Office of National Insurance would negotiate behind closed doors.

This new authority would make Treasury an enforcer - against U.S. states - of trade agreement and other international pacts' requirements - without a foreign country having to even initiate a challenge, much less an international tribunal ruling that a state law violated an international obligation! And, the meager federalism safeguards required when the federal government preempts a state law after such a trade pact ruling are absent in this proposal - this would allow for preemption to be implemented by the mere issuance of a Treasury determination. (All past trade pact implementing bills require that preemption may only occur after the federal government wins a federal court case in which it must bear the burden of proving de novo that there is an inconsistency between the state law and a pact.) It is hard to imagine that such a provision would be included in legislation aimed at reregulating the financial sector. But alas, tucked in the middle of the 1000-plus page bill is this proposal which is being pushed by the insurance industry.

State officials from several states, labor unions, consumer advocacy organizations and associations like the National Association of Insurance Commissioners (NAIC), National Conference of State Legislatures (NCSL), and National Conference of Insurance Legislators (NCOIL) have opposed this measure in past years.

Join Maine Superintendent Mila Kofman and Public Citizen's Global Trade Watch director Lori Wallach on our April 6 conference call to discuss how to fix this urgent problem in the coming weeks before the final bill is passed.

Will the U.S. Trade Representatives Consult with State Officials During TPP Negotiations -- Obama's First Potential Trade Deal?

The TransPacific Partnership (TPP) negotiations, the first rounds of which took place in March, are being closely watched because they have becomethe venue in which the Obama approach to trade pacts will be revealed. Broadly at issue is whether the new administration will use the TPP process to translate Obama's many specific campaign trade reform commitments into a new approach - or whether the administration will fall back on the trade agreement model used by the previous Bush, Clinton and Bush administrations. (See link to background memo on TPP below)

Despite a lot of rhetoric from the office of the U.S. Trade Representative (USTR), to date, based on conversations with several state legislators who are highly engaged in trade issues, it is difficult to gather what, if any, consultation has taken place at this point with state legislators - or with other state officials - even though a week of talks occured in March and more are slated for June. It will be critical to monitor whether the Obama administration initiates consultations on TPP in the next weeks, or whether states will need to demand a role.

In recent months, the USTR's office has issued statements and reports touting improved consultation with states under the Obama administration. Most recently, the USTR's "2010 Trade Policy Statement" underscored its plan for consultation with states during TPP negotiations: "The Administration will develop its negotiating objectives for the TPP Agreement consistent with its pledge to engage fully with diverse stakeholders in America. To that end, this Administration has embarked upon an unprecedented scale and scope of consultative outreach related to TPP involving all 50 states."

What remains to be seen is what this consultative outreach with states will actually look like and who will be consulted. In the past, USTR's consultation with states have been terribly inadequate. USTR's consultation has frequently been nothing more than sending letters to each state's "single point of contact," (SPOC) usually someone located in the state's Department of Commerce who may or may not share the information with relevant state officials.

Under the Obama administration, we have yet to see significant signs of improvement. USTR continues to rely heavily on communication with associations of state officials and with the Intergovernmental Policy Advisory Committee (IGPAC) instead of seeking input of state officials directly. (IGPAC is comprised of 29 state and local officials and association representatives appointed by the president.) There are serious problems with this approach. First, the single representatives of an association of state officials cannot adequately represent the interests of all their members and are not an appropriate substitute for gathering feedback directly from state officials about individual state interests and concerns. Further, IGPAC currently includes only four state legislators. IGPAC has requested more funding from the federal government to help support its task of representing the interests of all 50 states, but remains woefully underfunded.

Moreover, in recent years state officials have demanded a more formal role and a more reliable consultation system during trade negotiations. Five states (Maryland, Rhode Island, Hawaii, Minnesota and Maine) have even passed legislation which explains the specific ways in which they want to be consulted. These states require state legislative approval before the state is committed to comply with certain non-tariff provisions of international trade agreements that constrain state-level regulatory authority over matters such as land use, service sector regulation and state procurement that are under state authority.

Pending federal legislation - the TRADE Act - calls for USTR to fully consult with states and get state approval before committing the state's policies to comply with the procurement, services and investment chapters of trade agreements.

The negotiation of the TPP is the first test to see whether the Obama administration will take state concerns about consultation seriously or whether USTR will simply continue along with the failed Bush model of consultation save a few cosmetic fixes.

Click here for details about the TPP negotiations.


Sarah Edelman
Public Citizen's Global Trade Watch

Spring Conference Call - Urgent Call to Action to Prevent Preemption of State Insurance Regulations that Conflict with Trade Agreements!

Join Maine Superintendent Mila Kofman and Public Citizen's Global Trade Watch director Lori Wallach for a conference call on April 6 at 1:30pm EDT to learn about an extremely worrisome proposal coming before the U.S. Senate to create an Office on National Insurance with the authority to negotiate international agreements on insurance and preempt state laws it determines conflict with international agreements (full description of this provision in the body of newsletter). On this call, you will hear about what you can do to ensure that the Senate passes comprehensive financial regulatory reform without creating a ceiling on state insurance regulation.

RSVP here!

WTO Doha Round: After latest attempt to force a deal on WTO expansion stalls, will countries propose a new agenda?

Last week in Geneva the World Trade Organization (WTO) held a Doha Round "stocktaking" meeting. This session, which was announced at last year's WTO Ministerial meeting, was supposed to be a make-or-break summit of trade ministers that was declared to be critical for completing the beleaguered WTO expansion negotiations in 2010. Deep divisions about the substance and process of negotiations resulted in the vaunted spring stocktaking summit being downgraded to sessions last week among Geneva-based country representatives and some senior officials from member country capitals.

That there was insufficient support for - progress on - the Doha Round agenda even to allow for a legitimate stocktaking summit of countries' decision-makers last week is the signal that confirms what many WTO member countries say off the record: We will not see conclusion of the Doha Round this year or anytime soon, if ever.

The question is, when will WTO member countries agree to replace the Doha Round with an updated agenda?

Rather than proposing remedies to the financial and climate crises, the current WTO Doha Round agenda includes further financial deregulation and energy sector proposals that conflict with efforts now under way by the Obama administration and Congress and in other nations to stabilize the economy and transition to a low-carbon future. Public Citizen issued a statement last week noting that talks that include, for instance, the special Doha Round working party, whose only function is to set new disciplines limiting domestic regulation of all service sectors, have no place in an era when global leaders are calling for climate protection measures and financial services reregulation.

U.S. officials' messaging on the Doha Round, like that of most WTO member countries, remains schizophrenic; statements invariably begin by reiterating commitment to the Doha Round's quick completion and then proceed to enumerate the many deep problems with it and fundamental changes necessary before agreement is possible. Underlying these statements is a difficult reality: No country wants to be blamed for pulling the plug on these WTO talks, even as many seek a new approach.

We will keep you updated on the latest development in these talks. If they start to move, then urgent interventions will be needed, as the current agenda poses many threats to state policy space.

Learn more about the TransPacific Partnership Negotiations (TPP)

Click here for more news and information about the TPP Negotiations.

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