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State of Global Trade: Trade News for State & Local Officials

Newsletter Headlines:

  • If passed, Korea FTA Would Green Light More Foreign Investor Challenges
  • Why a New American Trade Policy is the Answer to State Fiscal Crises
  • New Tool for Understanding Effects of Trade Policy on Your Community

If Passed, Korea FTA Would Green Light More Foreign Investor Challenges

As the nation’s unemployment rate ticked closer to ten percent again earlier this month, the Obama administration announced it would push for early 2011 passage of the largest trade agreement since the North American Free Trade Agreement (NAFTA). The U.S.–Korea Free Trade Agreement (FTA) is modeled on NAFTA. The U.S. International Trade Commission (USITC) projected that it will increase the U.S. trade deficit.

With this move, the Obama administration has decided to ignore bipartisan public opinion against more of the same trade pacts, the National Conference of State Legislatures’ (NCSL) position on trade agreements and President Obama’s own campaign commitments to reform America’s trade pact model. On December 6, the administration announced a supplemental deal that tweaks only the auto provisions of the NAFTA–style Korea trade pact that President Bush negotiated and signed in 2007.

The limited changes leave in place the key trademarks of the failed NAFTA model that Americans oppose. Worse yet, Obama is calling this agreement the model for future trade agreements! This is NOT the change we were promised.

The current text ignores repeated calls by state officials for the elimination of the extreme foreign investor privileges and their private investor-state enforcement that promote offshoring and expose domestic financial, environmental and health laws to attack in foreign tribunals. Under similar NAFTA “Chapter 11” foreign investor rules, governments have already paid $329 million to foreign investors. See here for the full NAFTA Chapter 11 track
record.

Just this summer, state legislators at the NCSL legislative summit reiterated their stance against these extreme foreign investor privileges and for trade reform. Legislators unanimously passed the Free Trade and Federalism policy,
which lays out the essential state sovereignty safeguards that must be included in future trade agreements. The policy makes clear that state legislators will not tolerate another trade agreement that empowers foreign investors with the right to challenge state laws in foreign tribunals.

Unfortunately, under the Korea FTA at least 1,030 corporations with 2,055 establishments across the United States and South Korea would obtain new FTA rights to demand taxpayer compensation through challenges of U.S. and Korean federal and subfederal laws in foreign tribunals (
check out our investor map to see where the firms are located.)

Further, this pact is the last thing the U.S. economy needs. The Economic Policy Institute (EPI) conducted a study of the Korea FTA and found that the implementation of the Korea FTA could boost the U.S. trade deficit with Korea by $13.9 billion over the next seven years. This rise in the trade deficit, in turn, would cost the U.S. economy about 159,000 net jobs. Even the U.S. USITC, an independent federal body that analyzes the likely effects of trade agreements for Congress which has projected past pacts like NAFTA would not increase the trade deficit found that the Korea FTA would result in an increase in the total U.S. goods trade deficit.

This backwards agreement can only go into effect if Congress approves it. Because it will be considered under the anti-democratic Fast Track procedure, the fight will be in the House of Representatives. Tell your federal delegation to take the reins and make sure the United States does not yet again empower foreign investors to run roughshod over state and local laws —
contact Sarah Edelman for a sample letter.

Why a New American Trade Policy is the Answer to State Fiscal Crises

You’ve already been ahead of the curve in terms of addressing the threat trade agreements pose to state–level regulations. You’ve also been on the cutting edge of American economic revitalization policy with your calls for a new trade model.

Undoubtedly you have already witnessed the economic effects of failed trade policy in your state. NAFTA–style FTAs have led to massive job loss — over 43,000 factories have been shuttered, gutting 5 million manufacturing jobs since the implementation of NAFTA and the World Trade Organization (WTO). And, for Americans lucky enough to keep their jobs, U.S. wages have barely increased in real terms for decades, even as worker productivity doubled. With the hollowing out of the manufacturing sector, we’ve lost our middle class and a chunk of your state’s tax base.

There are various explanations for the devastation of U.S. manufacturing, jobs and your state’s tax base, but significant flaws in U.S. trade policy are certainly a key factor. Economic simulations have found that the U.S. economy could have supported an estimated 5 million more jobs if not for the massive trade deficit that has accrued under current U.S. trade policy.

In order to dig ourselves out of our current trade deficit – the largest trade deficit in the world – and our current jobs crisis, we will need smarter trade policy that prioritizes economic stability over new corporate offshoring privileges. However, in the midst of the economic crisis, multinational corporations are pushing for more NAFTA–style FTAs with Korea, Panama and Colombia that are filled with the same NAFTA–CAFTA offshoring incentives.
This push continues even as research shows that over the past decade the growth rate of U.S. exports to non–FTA partners has been twice that of U.S. exports to FTA partners.

Americans are fed up with NAFTA–style FTAs. A recent
Wall Street Journal poll found that the majority of Americans — GOP, Independents and Democrats — oppose NAFTA-style trade agreements. This opposition was echoed during the recent midterm elections in which over 200 congressional candidates ran on fair trade platforms. Candidates who ran on fair trade were as much as three times more likely to win their races.

To get our country on track, policymakers at the federal and state levels must stand with communities and voters and seek policies that will create jobs in the United States, and must oppose damaging NAFTA–style FTAs.


New Tool for Understanding Effects of Trade Policy on Your Community

Public Citizen recently launched a new Trade Data Center to help you better track and understand the causes of trade–related job loss in communities across the country as well as how trade agreements effect the environment, the economy and state sovereignty. It’s free and contains previously unavailable information that's packaged in an easy–to–understand, customizable and user–friendly format.

Trade Data Center users can run a variety of easy searches about job loss in their communities. For instance, using the database, we now know that nearly 400,000 jobs have been lost due to trade–related causes since the recession began. And in many states, this offshoring has been a significant contribution to unemployment and continues to hamper efforts to get people back to work.

Through extensive Freedom of Information Act (FOIA) requests to the U.S. Department of Labor (DOL), innovative computer algorithms and detailed information about contracts and siting of corporate headquarters, Public Citizen is able to make the following information available for the first time:

  • Trade–related job loss data that is mapped and searchable by congressional district, county, metro area, state, company name and more, as certified by the Department of Labor;
  • Information about foreign countries whose products caused these job losses;
  • Information about workers and companies that claimed trade–related job losses but that were denied adjustment assistance by the DOL;
  • A searchable NAFTA Chapter 11 database with descriptions and status of all investor cases multinational companies have been filed against the United States, Mexico and Canada; and
  • A map of the operations of multinational corporations in Korea and the eight countries that are currently negotiating a Trans–Pacific Partnership (TPP) trade agreement. Members of Congress and the public have requested that the Obama administration not include controversial NAFTA–style investor rights in this agreement. This map gives a sense of the sheer quantity and geographic reach of corporations that would be able to use these rights to attack public interest regulations in the U.S. and abroad.

Please contact me at 202–454–5193 if you have any questions while using the database. We hope that it supports you as you advocate for better economic solutions!

Thanks for all you do!
Sarah Edelman
Public Citizen’s Global Trade Watch

THIS WEEK: Thursday Dec. 16 Conference Call on the Korea FTA

The Obama administration has announced it will move Bush’s NAFTA–style trade agreement with South Korea forward without critical fixes. Join U.S. Congressman Mike Michaud (D–Maine), State Assembly Member Nancy Skinner (D–Berkeley) (invited), and GTW Director Lori Wallach today, Thursday, Dec. 16 at 1:00 p.m. EST for a full briefing on the deal, and find out how you can help put a stop to it!

Trans–Pacific Partnership Trade Talks in New Zealand

The Obama Administration has begun talks with Asian and Latin American nations to enter into a Trans–Pacific Partnership (TPP) agreement. Last week, the Obama administration participated in the fourth round of talks which took place at a casino in New Zealand — seriously. One major way to reduce the risks a TPP could pose for more offshoring and new liabilities from attacks on domestic health and environmental laws would be to agree with what now both the Australian and New Zealand governments have proposed: removing the dangerous investor-state private corporate enforcement of the deal from the negotiating table.

Investors Use CAFTA to Challenge Salvadoran Environmental Policy

As the Salvadoran government moves to create a sensible mining policy that safeguards the country’s vulnerable environmental resources, foreign investors who want in on El Salvador’s gold are increasingly turning to CAFTA to undermine Salvadoran efforts. Vancouver-based Pacific Rim and Milwaukee-based Commerce Group have each launched suits against El Salvador for over $100 million each using CAFTA investor rights. Hearings on these cases before World Bank tribunals began in recent months. These recent cases are terrifying examples of how U.S. and Korean investors could use the investment rights provided in the Korea FTA to similarly challenge U.S. and Korean public interest laws. Please use our backgrounders on these cases to get updated.

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