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.