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A few well-written words can convey a wealth of information, particularly when there is no lag time between when they are written and when they are read. The IPS blog gives you an opportunity to hear directly from IPS scholars and staff on ideas large and small and for us to hear back from you.

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Entries tagged "Free Trade"

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An Appeal to Canada to Stand with El Salvador, the First Nation to Halt Gold Mining

November 14, 2012 ·

I paid a visit this week to the Canadian Embassy with colleagues from the Institute for Policy Studies and other environmental and public policy organizations to deliver a letter to the Canadian Ambassador to the United States. We are demanding that his government tell Pacific Rim — the Vancouver-based mining company — to stop bullying the people of El Salvador.

John Cavanagh, IPS Director, speaks with Canadian Ambassador to discuss how Canadian company Pacific Rim is bullying El Salvador.

Our letter was co-signed by Greenpeace, Sierra Club, Public Citizen, Friends of the Earth, Earthworks, the Center for International Environmental Law, and others. We wrote:

“Given the severe environment and human rights implications associated with Pacific Rim’s investment in El Salvador and the gold mine and cyanide leach-water processing plant it is proposing, we urge the Canadian government to alert Pacific Rim that its investor-state claim against the Salvadoran government for enforcing its own environmental laws and striving to protect its water and communities tarnishes the image of the Canadian mining industry.”

Salvadoran community leaders tell us that, since 2009 when they came to Washington DC to receive the Letelier-Moffitt human rights award from IPS, Pacific Rim has been trying to transform itself from victimizer to victim. This behavior is reprehensible. Some have lost their lives due to anti-mining activities, such as Marcelo Rivera, the brother of one of those who received the awards, who was assassinated for speaking out about the perils of gold mining.

This is the effect of free trade agreements.

Despite the prospect of major environmental damage, Pacific Rim says it has the “right,” under the investor–state regime allowed by investment rules in free trade agreements, to reap the profits that would have been brought by gold mining. In pursuit of these so-called lost profits, Pacific Rim is demanding up to hundreds of millions of dollars in compensation at the International Centre for Settlement of International Disputes (ICSID), an unaccountable World Bank tribunal that operates behind closed doors.

The Sierra Club “opposes trade and investment agreements that allow foreign corporations to attack environmental and public health protections in secret trade tribunals,” says  Ilana Solomon, trade policy expert at the Sierra Club. “This lawsuit by Pacific Rim, which threatens the health and safety of communities in El Salvador, is a case in point for why we oppose these secret tribunals." 

Using large roll-out maps of El Salvador watersheds that he brought along, IPS director John Cavanagh explained to the First Secretary of the Canadian Embassy that, though there is always danger from the mining and processing necessary to extract gold, Pacific Rim’s activity in El Salvador is particularly threatening given that El Salvador is the second most water-starved country in our hemisphere. A full 98 percent of El Salvador’s surface water is contaminated, some of it from mining activity halted decades ago. Yet Pacific Rim stands to exacerbate El Salvador’s water problems, threatening the river that supplies water to over half the population. 

There is a broad consensus in the department of Cabañas and throughout the country that opening a mine in the Lempa River watershed presents a dangerous risk that El Salvador cannot afford. Polling shows that the people of El Salvador oppose gold mining and the government supports this mandate.

Pacific Rim claims that those who oppose gold mining are “certain,” “rogue,” and “anti-developmental” organizations. But hundreds of environmental organizations in the United States, Canada and globally stand firm to defend the right of the people of El Salvador  — the first nation to halt gold mining — to defend their environment and to implement public policies to this end. Yesterday we asked the embassy official to notify his government that we expect an escalation in worldwide protests demanding that Pacific Rim drop its suit at the World Bank’s ICSID, and leave El Salvador.

In addition to environmental concerns, Pacific Rim’s project has caused divisions and severe human costs. As our letter states:

“We are deeply troubled by the human rights abuses associated with the Pacific Rim mine. Already, four environmental activists have been assassinated and many more have been threatened, including journalists who operate a local radio station.”

No company should have the right to threaten a country like this.

Getting Around Geithner

March 4, 2012 ·

I've been trying to get the Obama administration to come out of the Dark Ages on the subject of capital controls for three years. The light, however, seems to be shining only outside Washington.

I know capital controls aren't exactly issue No. 1 on Americans' minds. But these tools for managing volatile hot money flows have saved countless families around the world from economic disaster. And while they're most frequently used in developing countries, promoting financial stability anywhere is in the interest of all of us.

Tim Geithner is stuck in the Dark Ages. Photo by U.S. embassy in New Delhi.So in the wake of the worst financial crisis in 80 years, I thought it would be a no-brainer for the U.S. government to give up its longstanding policy of banning capital controls through trade agreements. The North American Free Trade Agreement and dozens of other U.S. treaties severely restrict our trade partners' ability to use capital controls. If governments break the rules, foreign investors can sue their pants off in international tribunals.

In 2009, I was appointed to an official advisory committee to the Obama administration on investment policy, where I talked myself blue in the face about the need for a rethink on capital controls. To pump up the volume, I partnered with Professor Kevin Gallagher of Boston University to organize more than 250 economists to sign a letter to the administration, urging trade reforms to allow capital controls.

Many fancy economists were eager to sign -- a Nobel Prize winner, a former finance minister and Central Banker, a Harvard department head, etc... We got coverage in the New York Times and Wall Street Journal, as well as the opportunity to present the letter to Treasury officials and trade negotiators.

Finally, we received a reply from Treasury Secretary Timothy Geithner. The administration would "seek to preserve" current policy, he said, since, in his view, governments have sufficient alternatives to capital controls to deal with volatility.

Ouch. Geithner made the International Monetary Fund look like a relative beacon of progressive enlightenment. After decades of blanket opposition, the IMF now endorses capital controls on inflows of speculative capital under certain circumstances. They have recommended outflows controls in a number of countries facing capital flight, such as Iceland, and are supporting inflows controls to prevent speculative bubbles in emerging market countries.

What about Geithner's argument that there are plenty of other policy tools to deal with financial volatility? An IMF paper from 2010 went through the alternatives and concluded that in certain circumstances capital controls are still needed.

Fortunately, there are ways to get around Geithner. The greatest hope lies in other countries that may put up a fight over this issue. The Obama administration is negotiating a Trans-Pacific trade agreement with eight other governments: Australia, Brunei, Chile, Malaysia, Peru, New Zealand, Singapore, and Vietnam. Several of these have used capital controls effectively in the past.

For example, throughout most of the 1990s, Chile required a percentage of all foreign investments to be deposited in the central bank for a year, helping to prevent rapid capital flight. Malaysia imposed controls on capital outflows at the height of the Asian financial crisis in 1998. Nobel economist Joseph Stiglitz has written that this allowed Malaysia to "recover more quickly with a shallower downturn and with a far smaller legacy of national debt."

More than 100 economists from countries in the Trans-Pacific trade talks have signed a new letter urging more flexibility on capital controls. This time, signatories include prominent scholars from six of the nine participating governments, including well-known free trade supporter Professor Jagdish Bhagwati of Columbia University and former IMF officials Olivier Jeanne of Johns Hopkins University and Arvind Subramanian of the Peterson Institute for International Economics. The letter will be delivered to each of the nine governments on the eve of a big March 1-9 negotiating round in Melbourne, Australia.

This isn't the only fix needed in our trade agreements. But if we can't move beyond the Dark Ages belief in the wonders of unfettered financial flows, it's hard to imagine winning much else in the way of enlightened trade reforms.

Crikey! Australia Shocks Corporate America on Trade

March 2, 2012 ·

The Australian government doesn’t like it when global tobacco giants can sue them over public health laws. Corporate America finds this utterly unreasonable.

President Barack Obama and Australian Prime Minister Julia Gillard.Thirty-one U.S. corporate lobby groups, from the Business Roundtable to the National Potato Council, sent a letter to President Obama this week, urging him to give Australia a good smackdown.

The Aussies’ offense? They have refused to accept trade rules that allow foreign investors to sue governments in international tribunals. Known as “investor-state” dispute settlement, these rules are in every U.S. trade agreement negotiated in the past 20 years – except the 2005 U.S.-Australia pact.

The Land Down Under stood up to U.S. corporate goliaths and their representatives in the U.S. Trade Representative’s office that time around. But the issue has come up all over again because the two countries are negotiating a new trade pact with seven others, called the Trans-Pacific Partnership. Australia has reiterated its opposition to these so-called “investor rights” in this broader trade deal.

If anything, the government’s opposition has hardened since its last go-round with U.S. trade negotiators. That’s because Australia is now the target of a high-profile investor-state case. Philip Morris, of the Marlboro empire, filed a suit against Australia last year, demanding compensation for that country’s plain packaging laws for cigarettes. Oops – while Australia had kept investor-state out of the U.S.-Australia trade deal, it allowed it in some other treaties. Philip Morris simply used a subsidiary in Hong Kong to file the claim under a bilateral treaty between that nation and Australia.

In a statement surprisingly lacking in the usual bureaucratic mumbo jumbo, the Australians made clear they weren’t about to expand their vulnerability to such lawsuits by accepting investor-state in the Trans-Pacific Partnership.

Corporate America’s hair has been on fire ever since. In the lobby group’s letter to Obama, they warn ominously that “Australia’s rejection of investor-state dispute settlement is not only thwarting the ability of the TPP negotiations to produce strong enforcement outcomes, it is also having a corrosive effect on the level of ambition and other key aspects of the TPP negotiations. If Australia were able to extract such a major exemption, other countries would press forward to seek their own major exemptions from core commitments.” 

Translation:  they fear if the United States goes all soft on the Australians on investor-state, the other countries will smell blood and demand similar rules that are pro-public interest, but corporate-unfriendly. Several of the other governments are already attempting to stand up to U.S. pharmaceutical company proposals that would reduce access to affordable medicines.

Another hot-button issue is capital controls, which include various measures designed to manage the flow of volatile “hot money” across borders. More than 100 economists from TPP countries signed a statement this week urging negotiators to allow governments to use this proven tool for preventing and mitigating financial crisis. Seventeen corporate lobby groups have argued in another letter that permitting U.S. trade partners to support financial stability through the use of capital controls would undermine everything from U.S. jobs to national security. Despite growing consensus among economists that such controls are legitimate policy tools, it is standard U.S. trade policy to prohibit their use and allow investor-state claims against governments that violate these restrictions.

Besides the United States and Australia, others involved in the Trans-Pacific talks are:  Brunei, Chile, Malaysia, Peru, New Zealand, Singapore, and Vietnam. Their 11th round of negotiations is taking place in Melbourne, Australia from March 1 to 9. Let’s hope the Australian team that is taking on Corporate America can make the most of their home turf advantage.

Mining for Profits

December 18, 2011 ·

The small country of El Salvador has dared to stand up against powerful international gold mining companies. And now they're dealing with the blowback.

One of the companies salivating over El Salvador's gold is suing the government for their failure to bow down and grant a permit for a proposed mining project. There is strong local resistance to the project because of concerns it could poison a river that is the source of water for more than half the national population.

The company, Pacific Rim, is demanding in excess of $77 million in compensation, alleging violations of "investor protections" under the U.S. trade agreement with Central America.

If Pacific Rim wins, the government will face a stark choice: fork over a huge chunk of taxpayer dollars to a foreign corporation or put its people's health at risk.

But those fighting the case in El Salvador have an increasing number of influential allies in Washington, where the case is being heard at an international arbitration tribunal housed in the World Bank. On December 15, labor, environmental, faith, and other groups turned out for a rally to demand that the case be dismissed. They delivered a letter to World Bank and tribunal officials signed by more than 240 international organizations, including 14 U.S. labor unions.

Particularly notable among them was the United Mineworkers. Although their members' livelihoods depend on the mining industry, they expressed solidarity for those in El Salvador who are resisting this mining project because of the possible repercussions for public health and democracy.

El Salvador is still struggling to transition to representative democracy after years of civil war and there are lingering concerns about political violence. Tim Beaty, Director of Global Strategies for the International Brotherhood of Teamsters, spoke about his union's long history of solidarity with unions in El Salvador and said they are still seeking justice in the case of a Teamster organizer, Gilberto Soto, who was killed while he was working to make connections between U.S. and Salvadoran port workers in 2004. In the course of the dispute over Pacific Rim's proposed mining project, four Salvadoran anti-mining activists have been murdered.

The Pacific Rim case is just one example of a growing number of "investor-state" lawsuits over natural resources. An Institute for Policy Studies report, Mining for Profits in International Tribunals, finds that 43 of the 137 pending cases before the World Bank tribunal are related to oil, mining, or gas. By contrast, one year ago there were only 32 such cases and 10 years ago there were only 3.

Not surprisingly, this increase has coincided with an increase in commodity prices. The price of gold, for example, has quadrupled, from $282 per ounce in January 2000 to $1,900 in September 2011. Corporations are using expensive lawsuits filed under trade rules as one more weapon to get their hands on these valuable resources.

new video produced by the Democracy Center in Bolivia tells the broader story of how corporations are using these new powers to push back against all manner of government actions, including anti-smoking regulations in Uruguay, and the growing resistance in many developing countries. Even if Pacific Rim loses its case against El Salvador, the bigger struggle will continue to rewrite our trade rules so that governments don't have to face such outrageous cases in the first place. 

A Government Expense We Would Shut Down: U.S. Trade Representative Office

March 30, 2011 ·

After two months of Egypt, Japan, and Libya dominating the airwaves, the 112th Congress could return to the top of the headlines soon as a government shutdown seems more likely.

Following a series of short-term stopgap funding bills, a $50 billion difference remains between the proposals by top Republican and Democratic leaders. With this in mind, and to fight against the idea that progressives just want to spend our way out of problems, we would like to present a few ideas that might reduce government spending and increase its efficiency at the same time.

The proposed cuts we’ll be laying out in a series of blog posts this week range from military boondoggles to counterproductive drug war policies.

First up in the IPS chopping block is the U.S. Trade Representative Office (USTR). Currently employing a staff of 200 people and leasing real estate in Washington, Brussels, and Geneva, the USTR is an expensive agency, and its work seems increasingly redundant. Sarah Anderson, who directs the Institute's Global Economy project, says:

Trade negotiators aren't following through on President Obama's campaign promises to renegotiate NAFTA and are showing few signs of bringing a fresh approach to talks over new trade deals. If all they’re doing is expanding a model that undermines good jobs and the environment, it would be better to shut down USTR.

This cabinet-level-but-not-technically-in-the-cabinet position has been rumored to actually be in some downsizing plans that would incorporate it into the Department of Commerce. The agency’s chief, Ron Kirk, didn't seem to oppose the rumored move in a recent interview:

It's not a rumor. We've heard of it. We welcome it.... It is hypothetical.... I don't think we should be afraid of stepping back and taking a look and saying what do we do really, really well as USTR, and what do our partners do really well at Commerce or Ag?

The United States has signed 17 free-trade agreements, and is waiting for congressional approval on three more (Colombia, South Korea, and Panama) that the Bush administration negotiated and are similar to atrocious deals like NAFTA. Those agreements are a corporate scam, so why should taxpayers keep funding an agency that despite a change in administration pays its bureaucrats to propose the same thing over and over again?

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