Altered States

A new trade proposal would place local sovereignty in the hands of multinationals

Mischa Gaus

A back­door attempt to sub­ject states to cor­po­rate-dri­ven trade deals could under­mine laws that rein in capitalism’s worst abuses.

The Bush administration’s top trade offi­cial, Robert Zoel­lick, pushed gov­er­nors last Sep­tem­ber to sign onto a let­ter includ­ing their states in upcom­ing trade agree­ments, which would allow for­eign com­pa­nies to bid on the state’s pur­chas­ing and con­tracts, and there­by improve Zoellick’s nego­ti­at­ing position.

The let­ter did not say that if states signed they could lose the right to man­date that the goods they pur­chase abide by social and envi­ron­men­tal stan­dards. These include assur­ances about pre­vail­ing or liv­ing wages for con­trac­tors, sweat-free goods, recy­cled-con­tent rules for prod­ucts, renew­able-ener­gy tar­gets, con­sumer or envi­ron­men­tal label­ing on pack­ages, pro-union bid­ding prac­tices, bans on trade with abu­sive regimes and cor­po­ra­tions that have abysmal human rights records, and anti-off­shoring and buy local provisions.

The way a prod­uct is made and who does it are rights states hold in pur­chas­ing laws,” says Chris Slevin, a spokesman for Pub­lic Citizen’s Glob­al Trade Watch. They’re giv­ing those rights away.”

Under investor-pro­tec­tion claus­es enshrined in inter­na­tion­al trade pacts, cor­po­ra­tions can demand com­pen­sa­tion for state and local laws that con­flict with their prof­it-max­i­miz­ing motive. Such rules, like NAFTA’s investor-rights Chap­ter 11, have been used by U.S. cor­po­ra­tions to extract mil­lions from the Cana­di­an gov­ern­ment for imple­ment­ing inter­na­tion­al envi­ron­men­tal treaties and by a Cal­i­for­nia com­pa­ny to force Mex­i­co to pay it for block­ing a tox­ic-waste dump. The Clin­ton admin­is­tra­tion used these rules to pres­sure Mary­land not to sanc­tion Nige­ria for the country’s egre­gious human rights violations.

By sign­ing the let­ter, states give the Bush admin­is­tra­tion blan­ket approval to com­mit them to the rules of the Cen­tral Amer­i­can Free Trade Agree­ment (CAF­TA), a pact sched­uled for sign­ing in late May with five hemi­spher­ic neigh­bors, as well as bilat­er­al trade deals with Aus­tralia and Morocco.

State pur­chas­ing typ­i­cal­ly is exempt from trade agree­ments unless the state explic­it­ly con­sents. Because the let­ter seeks states’ inclu­sion in all trade pacts under nego­ti­a­tion, how­ev­er, it could bind states to the Free Trade Area of the Amer­i­c­as, NAFTA’s expan­sion to 31 more nations whose final require­ments are still unwritten.

When a copy of Zoellick’s let­ter to out­go­ing Demo­c­ra­t­ic Cal­i­for­nia Gov. Gray Davis leaked to groups like Glob­al Trade Watch ear­ly this year, it became clear that few of its hid­den details were known.

There’s no thought process going on,” says Richard Walsh, assis­tant direc­tor of gov­ern­men­tal affairs in the AFL-CIO’s field mobi­liza­tion depart­ment. No gov­er­nor would sign this if he or she thought it would revoke state laws.”

Cit­ing con­cerns that state mon­ey could sup­port the out­sourc­ing of jobs, four gov­er­nors — from Penn­syl­va­nia, Mis­souri, Min­neso­ta and Iowa — removed their states from the trade deals this month; 24 oth­ers remain com­mit­ted. We stand ready to engage in future trade agree­ments when we are cer­tain that such trade agree­ments ensure a lev­el play­ing field for our domes­tic employ­ers and work­ers,” Penn­syl­va­nia Gov. Ed Ren­dell, a Demo­c­rat, wrote in his May 11 let­ter rescind­ing his state’s involve­ment. The legal­i­ty of Zoellick’s invi­ta­tion to gov­er­nors also is dis­put­ed because how mon­ey is spent is a leg­isla­tive pre­rog­a­tive, not an exec­u­tive one.

Sup­port­ers of the trade deals say lim­it­ing state and local dis­cre­tion is an accept­able consequence.

When you’re try­ing to lib­er­al­ize trade, what you get depends some­what on what you offer,” says Robert Hamil­ton, trade pol­i­cy advis­er for Wash­ing­ton Gov. Gary Locke, a Demo­c­rat. Part of that exer­cise is giv­ing up sov­er­eign­ty to a degree.”

CAFTA’s authors ensured that the pact remained viable for gov­er­nors by exempt­ing minor­i­ty, vet­er­an and women hir­ing pref­er­ences in state and local con­tracts. But with no such safe­guards extend­ed to oth­er areas of social and envi­ron­men­tal leg­is­la­tion, crit­ics expect the worst. CAF­TA con­tains the same arbi­tra­tion pro­ce­dures that years of secret World Trade Orga­ni­za­tion tri­bunals have devel­oped to quash dis­guised restric­tions on trade.”

While local rule­mak­ing los­es, cor­po­ra­tions win big. Com­pa­nies can chal­lenge state law in these closed-door tri­bunals even if they are based else­where. Just as cor­po­ra­tions found ways to export jobs and off-shore their tax­es, says Dan Bee­ton of the Cit­i­zens Trade Cam­paign, a coali­tion of envi­ron­men­tal, labor and fair-trade groups, a firm could open a sub­sidiary shell in a coun­try that is par­ty to the trade deal and then use it to sue a state for restrict­ing its profit.

If this is suc­cess­ful,” says Ben McK­ean, nation­al orga­niz­er for Unit­ed Stu­dents Against Sweat­shops, I have to imag­ine it would move much fur­ther much faster. It would have a chill­ing effect on our core work.”

A pol­i­cy cli­mate that voids anti-sweat­shop rules in state pur­chas­ing, McK­ean says, could out­law the licens­ing agree­ments cor­po­ra­tions sign with uni­ver­si­ties pro­hibit­ing child labor, black­list­ing and oth­er abus­es in the pro­duc­tion of col­le­giate apparel.

Once states are locked into these trade deals, it is expen­sive to extri­cate them. Remov­ing a state requires com­pen­sat­ing all oth­er sig­na­to­ries to the pact for the loss of this ben­e­fit.”

They are bound despite the fact that state leg­is­la­tors have nev­er debat­ed it, let alone vot­ed on it,” Bee­ton says. The U.S. trade rep­re­sen­ta­tive knows this would not sur­vive the scruti­ny of the gen­er­al public.”

Mis­cha Gaus is an edi­tor of Labor Notes mag­a­zine, the largest inde­pen­dent union pub­li­ca­tion in the Unit­ed States.
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