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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 Agreements"

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.

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?

Economists Unite Around Once-Demonized Capital Controls

January 31, 2011 ·

Who says economic policy has to be polarizing? In a remarkable sign of consensus, more than 250 economists across the ideological spectrum have signed a letter to the Obama administration in support of capital controls.

Until quite recently, this would have been unthinkable. For decades, the International Monetary Fund and the U.S. government led a crusade to eliminate capital controls, which include taxes and other measures to manage cross-border "hot money" flows.

As part of a broader liberalization agenda, the IMF used loan conditions and the U.S. government used trade and investment agreements to try to end such policies. U.S. officials even insisted that trade rules allow foreign investors to sue governments in international tribunals over violations of their "rights" to free capital mobility.

Then, after several countries used capital controls effectively to insulate themselves from the ravages of the 1990s financial crises, the IMF's opposition began to soften. And since the 2008 financial meltdown, the IMF has actually recommended such controls in certain circumstances, such as to prevent massive capital flight in Iceland or to stem assest bubbles in emerging markets.

The U.S. government, meanwhile, has carried on the old crusade and now has trade or investment agreements with 52 nations that prohibit capital controls.

In the statement delivered to to the Obama administration, economists are urging the Obama administration to end these outmoded policies. Initiated by the Institute for Policy Studies and the Global Development and Environment Institute at Tufts University (GDAE), the letter carries endorsements from:

  • Former IMF Economists: e.g., Arvind Subramanian, now a Senior Fellow at the Peterson Institute for International Economics, and Olivier Jeanne, a Professor at Johns Hopkins University.
  • Free Trade Supporters: e.g., Center for Global Development President Nancy Birdsall and her colleague Kimberly Elliott, who, while critical of capital control restrictions, have been generally supportive of U.S. trade policies, from the Central America pact of 2005 to the pending U.S.-Korea deal.
  • A Nobel Laureate: Joseph Stiglitz.
  • Former High-ranking Government Officials: Harvard's Ricardo Hausmann, a former Inter-American Development Bank Chief Economist and Minister of Planning of Venezuela; Y. Venugopal Reddy, former Governor of the Reserve Bank of India; and José Antonio Ocampo, former Finance Minister of Colombia.

As the letter points out, this is a timely issue since "in recent months, a number of countries, from Thailand to Brazil, have responded to surging hot money flows by adopting various forms of capital regulations."

The Obama administration has ample opportunities to bring a fresh approach to ongoing negotiations in its:

Making sure these deals don't prevent governments from using sensible capital controls would be one important part of a pro-worker, pro-environment, pro-democracy trade reform agenda. If we've learned anything from the current crisis, it's that we're living in a globalized financial system, where chaos in one part of the world can be devastating for businesses and workers elsewhere.

Deal on U.S.-Korea Trade Would Expand Excessive Investor Protections

December 10, 2010 ·

Approval of a White House deal on a trade agreement with Korea appears increasingly uncertain, as several labor unions and key Democrats have announced their opposition.  The deal, announced December 3, includes revisions to the pact negotiated by the Bush administration in the areas of market access for automobiles and beef.  These changes resulted in a split in the U.S. labor movement, with the United Auto Workers and the United Food and Commercial Workers coming out in favor of the deal but the AFL-CIO, Steelworkers, Communications Workers, and the Machinists opposed.

One of the most disappointing aspects of the “deal” is the failure to address widespread concerns over excessive investor protections.  Current U.S. trade and investment agreements allow private foreign investors to bypass domestic courts and sue governments in international tribunals over actions, including public interest regulations, that reduce the value of their investment.

On the campaign trail, President Barack Obama made several promises to revise these rules.  For example, he stated “With regards to provisions in several FTAs that give foreign investors the right to sue governments directly in foreign tribunals, I will ensure that foreign investor rights are strictly limited and will fully exempt any law or regulation written to protect public safety or promote the public interest.  And I will never agree to granting foreign investors any rights in the U.S. greater than those of Americans.”

As Rep. George Miller (D-CA), chair of the House Education and Labor Committee, points out, however, such changes were not made in the Korea deal.  According to Miller, “The rights granted foreign investors are far too broad and allow foreign corporations to skirt the rule of American law, such as for health and environmental protections, and American courts by using private arbitration panels to demand compensation from US taxpayers for upholding our own labor standards and other essential regulations.”

The Communications Workers of America also drew attention to the problems with the deal’s investment rules:  “This agreement gives investment and legal protections to large multi-national corporations which shift jobs offshore in search of the lowest labor and environmental costs and highest profits.  With no counter balance, multi-national corporations whipsaw workers and nations to prevent and eliminate bargaining rights.”

Several major U.S. environmental groups have also emphasized the problems with investor protections.  According to Friends of the Earth, “The Korea trade pact replicates some of the worst aspects of NAFTA (North American Free Trade Agreement), providing foreign investors the right to challenge U.S. public health and environmental regulations that could put a dent in their current or expected profits. Like NAFTA, the agreement would also allow South Korean companies to challenge U.S. environmental laws in secret, unaccountable trade tribunals that completely bypass the U.S. judicial system.”

One little-known aspect of the investment chapters of U.S. trade agreements is that they ban the use of capital controls, a tool that has been used effectively by many countries to prevent or mitigate financial crisis.  New Zealand academic Jan Kelsey has pointed out that recently adopted capital controls by the government of Korea would likely be in violation of the trade pact’s investment rules. According to Kelsey, “a number of measures adopted by South Korea in its national interest appear to conflict with the agreements it has signed with the US and the EU and also reveals inconsistencies in Korea’s obligations under the two agreements and with other international instruments that allow them more flexibility.”

As Boston University professor Kevin Gallagher stated in his article Obama must ditch Bush – era trade deals, “South Korea will join the growing group of nations that have recently resorted to currency controls in the wake of the global financial crisis. As a rash of new research has shown, such controls are legitimate tools to prevent and mitigate financial crises. Yet if the pending South Korea-US free trade agreement had been ratified by now, South Korea’s actions would be deemed illegal.”

Despite strong opposition from civil society groups in the United States and South Korea, the White House is expected to seek Congressional approval of the U.S.-Korea trade deal in early 2011.

Obama's Trip to India: Don't Rush into a Bilateral Investment Treaty

October 26, 2010 ·

After what’s expected to be a grim election for his party, President Barack Obama will fly to the other side of the planet next week.  In the lead-up to his first visit to India, there have been calls from many quarters for the two countries to sign a bilateral investment treaty.

Corporate lobbyists seeking increased market access have been pushing for such a deal for years.  Recently, top foreign policy officials from the Bush administration also weighed in. 

In a report published by the Center for a New American Security, former Deputy Secretary of State Richard L. Armitage and former Under Secretary of State for Political Affairs R. Nicholas Burns wrote that “The United States and India should prioritize the need to advance the multilateral trading system. They can accomplish this by adopting bilateral trade and investment measures that they would like to see other countries emulate.  This should begin with the launch of serious negotiations toward the long-delayed Bilateral Investment Treaty that would, in light of the tremendous domestic Indian market and increasing bilateral investment flows, create a more stable environment for growth.”

Armitage and Burns provided no details of what’s actually in bilateral investment treaties (BITs).  Many analysts who’ve taken a closer look argue that the current U.S. model for such treaties would be likely to lead to less economic stability – not more. 

Treaty provisions that should be of serious concern to India are those that prohibit the use of capital controls, a policy tool that India has applied effectively to escape the worst impacts of global financial crises.   

In a New York Times article, former IMF chief economist Kenneth Rogoff reported that Indian policymakers were the most cheerful attendees at the 2009 World Economic Forum in Davos, largely because that government’s stringent capital controls were helping to insulate the country from the economic crisis.

A February 2010 IMF report of a larger group of nations found that those which deployed controls on inflows before the current crisis were among the least hard hit. The IMF study concluded that capital controls are a legitimate policy tool for preventing and mitigating crises.

What happens if a government violates the capital controls provisions in a U.S. trade or investment treaty?  Private foreign investors affected by the policy have the right to sue the government for compensation in supra-national tribunals that have no public accountability, no standard judicial ethics rules, and no appeals process.

In response to criticism, a handful of recent U.S. trade agreements have included a special dispute settlement procedure for investor-state claims related to capital transfers. The U.S.-Peru free trade agreement, for example, limits damages arising from certain restrictive measures on capital inflows to the reduction in value of the transfers. Investors may not demand compensation for the loss of profits or business. In addition, there is an extended “cooling off” period before investors may file claims.

While a step in the right direction, these provisions still place undue restrictions on the authority to use capital controls. If they were included in any possible U.S.-India treaty, the government of India would still face the prospect of expensive investor-state damages claims.  They could be tied up in legal proceedings for years, defending a legitimate policy that has proved effective in reducing financial instability.

The negotiations over a U.S.-India treaty were begun by the Bush administration.  Obama officials have said they won’t complete the deal until they finish up a review of the U.S. model BIT.

Let’s hope U.S. and Indian leaders won’t get carried away by the pressures of the upcoming Obama visit to produce a treaty that may serve the short-term interests of large corporations and investors but would undermine the authority of governments to protect their people from financial crisis.