The scorecard of NAFTA: Losses for all three countries

The North American Free Trade Agreement has been a lose-lose-lose proposition for working people in Canada, the United States and Mexico.

Let us count the ways: Lost jobs, reduced wages, more unemployment, higher food prices and reversals of environmental laws. NAFTA, a 20-year laboratory for mainstream economics, has been a bonanza for the executives of multi-national corporations, and that is all you need to know why the so-called “free trade” model continues to be promoted despite the immiseration and dislocation it spawns. Agreements like NAFTA, and proposed deals that would go further in handing power to corporate executives and financiers such as the Trans-Pacific Partnership, have little to do with trade and much with ensuring corporate wish lists are brought to life.

Not dissimilar to medieval doctors who insisted that having leeches bleed the patient was the only course of action, neoclassical economists, who dominate the field, won’t budge from their prescriptions of neoliberal austerity. But although the medical field has made enormous strides in recent centuries, there is no such progress among neoclassical economists. That is because said economists — most often under the banner of “Chicago School” but sometimes using other names — promote ideology on behalf of the powerful, not science for all humanity.

"Canada in fog" photo by Kat Spence

“Canada in fog” photo by Kat Spence

Thus the spectacularly wrong predictions made for NAFTA before it was went into force on January 1, 1994, have no effect on their predictions for new deals. To provide one example, in 1993 the Peterson Institute for International Economics predicted 170,000 jobs would be created in the U.S. alone by 1995, that the U.S. would enjoy an expanded trade surplus with Mexico and that the Mexican economy would grow by four to five percent annually under NAFTA.

As we will see presently, none of those rosy predictions came close to becoming reality. (True to neoliberal form, the institute is grandly predicting “gains of $1.9 trillion” for the Trans-Pacific Partnership.) The point here isn’t to pick on one particular institution — in fact, it is quite typical. The models developed to make these predictions and explain economics are mathematical constructs disconnected from the real world.

Sure it works better in a dream world

The Chicago School and other mainstream neoclassical schools of economics rest their models on the concept of “perfect competition,” which assumes that all prices automatically calibrate to optimum levels, and that there are so many buyers and sellers that none possess sufficient power to affect the market. This model assumes that employees are in their jobs due to personal choice, and wages are based only on individual achievement independent of race, gender and other differences. That this bears little resemblance to the real world is not your imagination.

From this, mainstream economists assume all trade will be beneficial because all economic activity quickly adjusts to create a new equilibrium following a disruption. As Martin Hart-Landsberg wrote in his 2013 book Capitalist Globalization: Consequences, Resistance and Alternatives:

“[T]his kind of modeling assumes a world in which liberalization cannot, by assumption, cause or worsen unemployment, capital flight or trade imbalances. Thanks to these assumptions, if a country drops its trade restrictions, market forces will quickly and effortlessly lead capital and labor to shift into new, more productive uses. And since trade always remains in balance, this restructuring will generate a dollar’s worth of new exports for every dollar of new imports. Given these assumptions, it is no wonder that mainstream economic studies always produce results supporting ratification of free trade agreements.” [page 104]

World Bank studies promoting “free trade” agreements, Professor Hart-Landsberg wrote, assumes that tariff reductions will have no effect on government deficits, governments will automatically be able to replace lost tariff revenue with revenue from other sources and that there is full employment. He writes:

“Although working people have been ill served by capitalist globalization, many are reluctant to challenge it because they have been intimidated by the ‘scholarly’ arguments of those who support it. However … these arguments are based on theories and highly artificial simulations that deliberately misrepresent the workings of capitalism. They can and should be challenged and rejected.” [page 80]

Mexican farmers forced off their lands

Mexico had annual per capita gross domestic product growth of 0.9 percent in the first 20 years of NAFTA — one-fifth of the per capita GDP growth of the preceding 20 years. The Center for Economic and Policy Research reports that Mexico’s growth during the past 20 years under NAFTA ranks the country 18th of 20 Latin American countries and is half of the average Latin American growth rate. Among other results, the center reports:

• 4.9 million family farmers have been been displaced — more than half the total number of Mexican farmers in 1991.
• More than 14 million more Mexicans live below the poverty line than in 1994. Just more than half of Mexicans are below the poverty line, nearly identical to the 1994 rate, but the population has increased.
• Inflation-adjusted wages have risen two percent over 18 years and are barely above the 1980 level.

Subsidized corn from the United States flooded Mexico, sold below the costs of small Mexican farmers. Corn imports from the U.S. increased fivefold and pork imports from the U.S. increased by more than 20 times, according to a Truthout report by David Bacon.

As a result, Mexican farmers forced off their land either became seasonal workers on growing agribusiness farms, sought work in the cities or migrated north. Seasonal agricultural workers (those working less than six months per year) grew by almost three million — more than doubling their ranks — during the same period that 4.9 million family farmers were displaced. The number of Mexicans emigrating to the U.S. rose by almost 80 percent from 1994 to 2000, before falling significantly afterword because of the post-9/11 increased border security.

Nor did Mexicans get cheaper food as a result of the flood of U.S. corn. Public Citizen, in its just released report on NAFTA, reports that the deregulated price of tortillas nearly tripled in the first 10 years of the agreement and that a Mexican minimum-wage earner can buy 38 percent less than he or she could when NAFTA went into effect.

The only countervailing effect, the increase in factory jobs as maquiladoras (factories near the U.S. border producing for export) increased for a time, but those low-wage jobs are now dwindling because China’s wages are far cheaper than Mexico’s. The same pitiless market competition that sent jobs south now sends them across the Pacific. China now accounts for 23 percent of U.S. imports as compared to Mexico’s 12 percent, according to International Monetary Fund statistics.

A 2011 paper issued by the Economic Policy Institute summarized the effects of NAFTA on Mexico:

“From the standpoint of the business community, NAFTA’s most important achievement was that it made Mexico a much safer and more attractive location to invest and outsource U.S. manufacturing production. NAFTA’s investment provisions created new and improved safeguards for foreign investors, including new dispute settlement tribunals providing a mechanism for settling disputes with foreign governments outside of the Mexican legal system. By eliminating Mexico’s developmental state and use of local content rules, and other demands and conditions on foreign investors, the trade agreement greatly reduced the cost of doing business in Mexico, and increased the security of those investments.” [page 6]

Mexico’s conversion into an export platform does not mean higher skills for its workforce. The biggest initiative in job creation came during the administration of Vicente Fox, which offered training in low-skill jobs for landscapers, construction workers, factory workers and maids.

Hundreds of thousands of jobs leave the United States

The United States has seen a net displacement of almost 700,000 jobs through 2010 directly attributable to NAFTA, according to Economic Policy Institute calculations. Moreover, the U.S. has had large annual trade deficits with Mexico since NAFTA was implemented; in earlier years, trade was roughly balanced between the two. In addition to the job losses, Public Citizen reports these negative impacts on U.S. workers:

• U.S. food prices have risen 67 percent since NAFTA took effect, despite an increase in food imported from Mexico and Canada.
• Purchasing power for U.S. workers without a college degree, adjusted for inflation and taking into account those consumer goods that have become cheaper, has declined 12 percent under NAFTA.
• Two-thirds of displaced manufacturing workers who were rehired in 2012 experienced a wage cut; the reduction in the majority of cases was at least 20 percent.
• U.S. manufacturing and services exports to Mexico and Canada grew slower after NAFTA took effect than it had been earlier.

By making it easier for capitalists to move production, NAFTA has directly contributed downward pressure on wages. With fewer well-paying manufacturing jobs, pressure on wages not only affects manufacturing but other industries as well as displaced workers seek employment elsewhere.

Capital mobility has been an irresistible hammer for holding down wages and worsening job conditions — a study by Cornell University Professor Kate Bronfenbrenner found that more than 50 percent of employers made threats to shut down and/or move their facilities in response to unionization activity during the three-year period of 1993 to 1995, and that the rate of actual shutdowns tripled from the pre-NAFTA rate. She wrote:

“NAFTA has created a climate that has emboldened employers to more aggressively threaten to close, or actually close their plants to avoid unionization. The only way to create the kind of climate envisioned by the original drafters of the [National Labor Relations Act], where workers can organize free from coercion, threats, and intimidation, would be through a significant expansion of both worker and union rights and employer penalties in the organizing process both through substantive reform to U.S. labor laws and by amendments to the North American Agreement on Labor Cooperation.” [page 3]

That would take massive organizing to achieve. The Obama administration is actively trying to use the rules of NAFTA as a starting point for further weakening of labor, safety, health and environmental laws in the ongoing Trans-Pacific Partnership negotiations, which would tighten corporate control should the ongoing TPP negotiations be successful. The White House undoubtedly has the same goals for the Transatlantic Trade and Investment Partnership talks with the European Union.

Canadian safety net shredded to ‘compete’ in markets

Spending on Canada’s social safety net has decreased while corporate revenue has doubled and manufacturing jobs disappeared. In addition, a Canadian Centre for Policy Alternatives researcher reports, the country’s growing trade surplus with the United States has translated to few jobs. The study found:

• After 12 years of NAFTA, government transfers to individuals have dropped from 11.5% of GDP to 7.8% of the country’s GDP.
• “[M]uch of the growth in gross exports over the last decade reflected the markedly elevated use by Canadian-based companies of imported inputs in their production, significantly overstating the employment impact of the growth of manufactured exports.”
• The length that Canadians could collect unemployment benefits was reduced, the amount of the benefits were cut and the criteria for those eligible were reduced, reducing the proportion of unemployed people who qualified for unemployment insurance to one-third from three-quarters.
• Composite revenues of 40 of Canada’s biggest businesses increased 105 percent from 1988 to 2002, while their workforces shrank by 15 percent.

These developments fueled rising inequality, the centre’s executive director, Bruce Campbell, wrote:

“The most striking feature of this growing inequality has been the massive gains of the richest 1% of income earners at the expense of most of the population. The growth of precarious employment, the undermining of unions as a countervailing power to transnational capital, the erosion of the Canadian social state, and heightened economic dependence on the United States are the hallmarks of the free trade era in Canada.” [page 53]

Pressing its advantage, Canadian big business interests demanded and received tax cuts on the ground that Canada could not be competitive otherwise. Those cuts resulted in loss of C$20 billion in federal revenue for 2005 alone, the study said, on top of provincial revenue losses of $30 billion. The tax cuts were primarily given to high-income individuals and corporations, who argued that these would create “a level field of competition” with the United States but also increase labor market “flexibility” — a code word meaning lower wages and reduced job security, always the goal of capitalists.

It’s always our turn to ‘cut back,’ never the bosses’ turn

The key NAFTA provision is Chapter 11, which codifies the “equal treatment” of business interests in accordance with international law and enables corporations to sue over any regulation or other government act that violates “investor rights,” which means any regulation or law that might prevent the corporation from extracting the maximum possible profit.

Under these provisions, taxation and regulation constitute “indirect expropriation” mandating compensation — a reduction in the value of an asset is sufficient to establish expropriation rather than a physical taking of property as required under U.S. law. Older decisions become precedents for further expansions of investor “rights” and thus constitute the “evolving standard of investor rights” required under “free trade” agreements.

Toothless “side agreements” on labor rights are meaningless window dressing; the arbitration bodies that decide these cases (in secret with no accountability or right of appeal) are governed by the main body of the text, such as Chapter 11. Corporations can sue governments over regulations or laws they don’t like, but working people and governments have no right to sue.

As Mr. Bacon put it in his Truthout report:

“The most any union or group of workers got from filing a case was ‘consultations’ between the governments and public hearings. There is no process in the agreement for penalties for violation of union rights. And although there are minor penalties for violating child labor or occupational health laws, they’ve never been implemented. Not a single contract was signed as a result of the side-agreement process, nor was a single worker rehired. Those unions that have filed cases have generally sought to use the process to gain public exposure of abuses and exert indirect pressure on employers.”

The neoliberalism that began gathering steam with the rise of Margaret Thatcher and Ronald Reagan, and which has intensified since, is not the handiwork of some secretive cabal, nor is it some tragic bad turn from an otherwise “rational” system. It is the natural evolution of modern capitalism and its relentless competition. “Free trade” agreements that have little to do with trade and much to do with imposing corporate wish lists in the service of ever more inequality and power imbalances is an inevitable component.

Implementing a “reform” of agreements designed to maximize corporate profits above all other considerations and shred the remnants of democracy is less than an illusion. Overturning the entire “free trade” apparatus is indispensable to any serious project of building a better world. Trade should conducted for the benefit of all, not only the one percent — unlike the current global system in which human beings are in the service of markets instead of the other way around.

Putting a gun to their own heads: Governments give themselves a ‘free trade’ offer they can’t refuse

A frequent criticism of “free trade” agreements is that corporations are elevated to the level of a country. It might be more accurate to say that corporations are elevated above countries.

The muscle in trade agreements like the North American Free Trade Agreement or the proposed Trans-Pacific Partnership is the mandatory use of “investor-state dispute mechanisms.” That bland-sounding bureaucratic phrase is anything but bland in its application — these “mechanisms” are the tools used to turn corporate wish lists into undemocratic reality.

Labor, environmental, social-justice and other groups rally on the steps of New York City Hall on January 14 to demand Congress vote against fast-track legislation.  (Photo courtesy of New York State AFL-CIO)

Labor, environmental, social-justice and other groups rally on the steps of New York City Hall during a January 14 snowstorm to demand Congress vote against fast-track legislation.
(Photo courtesy of New York State AFL-CIO)

The concrete form of these “mechanisms” are corporate-dominated secret tribunals that hand down one-sided decisions with no oversight, no public notice and no appeals. This is so is because governments that sign trade agreements legally bind themselves to mandatory arbitration in these secret tribunals despite (or because of) their one-sided nature. It is a virtually certainty that, should be they passed into law, the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) will contain some of the most draconian language yet in this area.

Activists in the TPP countries, as well as those in the European Union, should pay particular attention to the experience of Canada under the North American Free Trade Agreement (NAFTA). Canada has been the principal target within NAFTA because of its superior environmental laws in comparison to the United States and Mexico, with U.S.-based multi-national corporations the primary suers. Environmental, safety, labor and “buy local” laws around the Pacific and in Europe will be targets should the TPP and TTIP be implemented.

The rules of NAFTA allow multi-national corporations to sue national governments because rules safeguarding the environment, for example, are interpreted to “unfairly” reduce profits. Decisions handed down in the secret tribunals — in which corporate lawyers who specialize in representing corporations in these kinds of cases sit as judges — further stretch the bases on which corporations can successfully sue governments. NAFTA, and tribunal judgements stretching it, constitutes the starting point from which the U.S. government, sometimes assisted by other governments, seeks to impose still more draconian rules.

Corporations can change laws to suit themselves

Decisions made under NAFTA rules are noteworthy because of their outrageousness, but also merit attention because they provide a preview of what is in store for other countries under the Trans-Pacific Partnership and Transatlantic Trade and Investment Partnership. Here are some “highlights”:

  • Eli Lilly and Company is suing Canada for $500 million because Canada would not grant it two patents, rulings upheld by the Supreme Court of Canada. Eli Lilly claims the denial is an illegal confiscation of profits — it is using NAFTA as a tool to dismantle Canada’s well-developed patent system. No tribunal ruling yet.
  • Ethyl Corporation sued Canada for $250 million because of a ban on a gasoline additive known as MMT, a chemical long believed to be dangerous to health. Ethyl claimed the Canadian ban was an “expropriation” of its “investment” and a violation of the principal of “equal treatment” even though, had a Canadian producer of MMT existed, it would have had the same standard applied. Canada settled to avoid a total defeat, paying Ethyl a smaller amount and reversing its ban.
  • A U.S. company, Metalclad, sued Mexico because a city government refused to grant it a permit for a waste dump (similarly denied to a Mexican company that previously wanted to use the site). Mexico lost, and had to grant the permit despite environmental concerns and pay $15.6 million to Metalclad.
  • Another U.S. company, S.D. Myers, sued Canada because of a ban on the transportation of PCBs that conformed with both a Canada-United States and a multi-lateral environmental treaty. A tribunal ordered Canada to pay $5.6 million and reverse the ban, negating the two environmental treaties and ignoring the fact that PCBs are known carcinogens banned since 1979 in the U.S. The tribunal ruled that, when formulating an environmental rule, a government “is obliged to adopt the alternative that is most consistent with open trade.” So much for democracy!

The above is merely the tip of the iceberg. How do such extraordinarily one-sided decisions get handed down? Because the corporations dominate the tribunals and play a heavy role in writing the trade agreements to begin with. There are 605 corporate lobbyists who have access to the Trans-Pacific Partnership text — officially known as “trade advisers” — but no members of any legislative body are allowed to see it, and the public is completely shut out. The “advisers” are eagerly working to make the TPP a repository for their wish lists.

The key to making corporate dreams come true is the “investor-state dispute mechanism.” Under these mechanisms, governments legally bind themselves to settle “disputes” with “investors” in the secret tribunals. By far the most used of these tribunals is the International Centre for Settlement of Investor Disputes (ICSID) — an arbitration board that is an arm of the World Bank. Cases that go before one of the Centre’s tribunals are decided by a panel of three judges that are selected from a roster. The judges are appointed by the national governments that have signed on to ICSID, which include most of the world’s countries.

Working to overturn Australian laws, but he’s ‘neutral’

These judges are not disinterested arbiters. For example, one of the judges appointed to the ICSID by New Zealand is David A.R. Williams, who is currently representing Philip Morris in its suit seeking to force Australia to overturn its tobacco regulations. Australia’s rules limiting tobacco advertising and packaging, enacted in the interests of public health, were found to be legal by Australia’s supreme court, the High Court.

Not willing to accept the Australian constitution, Philip Morris moved some of its assets to Hong Kong, so it could declare itself a Hong Kong company eligible to sue Australia under the Australia-Hong Kong bilateral investment treaty, which, unlike some Australian trade pacts, allows corporations to sue one or the other government. (This case is still pending.)

The ultimate arbiter of a constitution, or writer of laws, are not domestic bodies subject to democratic checks, but unaccountable corporate representatives acting in secret. Who are these mercenaries? As an example, each of the eight ICSID judges appointed by the United States has a long career dedicated to serving large corporations. Six are currently partners in some of the world’s most formidable corporate law firms, one is an academic who formerly was a corporate lawyer and one is a lobbyist for a business group that seeks to codify pro-corporate trade rules under law.

That is a common pattern. One of Australia’s appointees is Doug Jones, a lawyer with one of Australia’s largest corporate law firms, and one of Chile’s is Carlos Eugenio Jorquiera, a corporate lawyer and president of the country’s National Chamber of Commerce.

Further titling the scales are that only corporations, not governments nor public-interest groups, can sue under these treaties. Governments must pay expenses that can total tens of millions of dollars, regardless of outcome, with no provisions to block frivolous claims. The judges are paid by the hour, with no defined limits on costs, giving them an incentive to drag out proceedings, which in turn favors deep-pocketed “investors.”

In fact, the TPP would place no limits on who qualifies as an “investor”: Anyone who applies for a permit or license, or who “channels” resources or capital to set up a business, without placing any limits on what qualifies for such a status, would be eligible to sue.

‘Customary law’ is what a corporation says it is

Leaked article 12.7 of the TPP, for instance, provides a long list of prohibitions against government actions. Under it, laws imposing capital controls (even to ameliorate a crisis), rules governing domestic content of products or any protections of any domestic industry would be illegal. It then provides a generic exception allowing environmental or other measures “that are not inconsistent with the Agreement; necessary to protect human, animal, or plant life or health; or related to the conservation of living or non-living exhaustible natural resources.”

But that exception is rendered meaningless not only by other, superseding, rules but by the rulings of the corporate-lawyer judges in the secret tribunals. Leaked TPP language specifically requires that excepted rules must be “not inconsistent with the Agreement.” The key sentence opens Article 12.6: “Each Party shall accord to covered investments treatment in accordance with customary international law.” The “Party” here are national governments, and the “customary international law” is that already established by NAFTA and the decisions made by ICSID and similar tribunals concerning disputes under NAFTA and other trade agreements.

Last year’s change of government in Australia has left working peoples in the 12 TPP negotiating countries more vulnerable. Under the previous Labor governments, Australia had refused to agree to the insertion of an investor-state dispute mechanism in the TPP. The new Tony Abbott government, however, has shown worrisome signs of reversal on this critical issue, claiming that such mechanisms would provide “greater market access for Australian exporters.”

The world’s 99 percent can’t afford to lose any bulwark against substituting corporate-dominated secret tribunals for democracy because the Obama administration is pushing hard for the most draconian rules. Knowing that secrecy is the only way for the TPP to gain approval of the U.S. Congress, the White House is pushing for “fast-track authority” — under which, Congress could not change so much as a comma of an agreement, would be severely limited in its ability to debate and would be obligated to vote yes or no in a very short period of time.

An increasingly strong pushback by activists in the U.S. has led to more than 200 members of Congress publicly committing themselves to voting against fast-track, which only Congress can impose on itself. Many of the other 11 national governments negotiating the TPP are nervously watching this development, because if Congress votes against fast-track, it will be far more difficult for TPP to earn congressional approval, leaving those governments less willing to buck their own internal oppositions.

If you believe that democracy is preferable to corporate dictatorship, the time is now to join an international fight against the Trans-Pacific Partnership and its spawn, such as the Transatlantic Trade and Investment Partnership.

‘Transatlantic Partnership’ intended to duplicate secret Trans-Pacific Partnership

Neoliberalism knows no borders, so perhaps it should not come as a bolt out of the blue that the United States and European Union are set to negotiate a “Transatlantic Trade and Investment Partnership.”

It might be thought that the Obama administration would have its hands full with the ongoing, top-secret Trans-Pacific Partnership talks, but it seems that much can be done in the absence of any pesky oversight. It might be thought that European Union officials would have their hands full with their series of financial crises, but it appears this is an irresistible opportunity to safeguard austerity.

Ah, can’t you just imagine corporate leaders sitting around a camp fire singing, “We are all the Cayman Islands now.” Surely they would be jolly folks and allow the political leaders who so graciously granted their wishes seats close to the fire.

This dystopia is sponsored by the usual corporate organizations. The trans-Atlantic trade agreement evaded all radar until U.S. President Barack Obama’s announcement in his State of the Union address but had been in the works for more than a year. To the applause of business groups on both sides of the Atlantic.

No details of any kind have emerged about the trans-Atlantic trade agreement, only generalities. It would seem that holding two sets of negotiations among dozens of countries would be difficult, but then it is remembered that the Trans-Pacific Partnership is designed to be “scalable” — a euphemism meaning that the terms will be final. Any countries not among the present negotiators can join at any time but must accept that no terms already agreed upon are negotiable. Could this be the model for the Trans-Atlantic pact?

Big Business already cheering on the negotiators

A “U.S.-E.U. High Level Working Group on Jobs and Growth” was created at a United States-European Union summit meeting in November 2011, tasked with “identifying policies and measures to increase U.S.-EU trade and investment to support mutually beneficial job creation, economic growth, and international competitiveness,” according to the Office of the United States Trade Representative. It is unknown who sat on the “high-level” group, but it is chaired by European Trade Commissioner Karel De Gucht and U.S. Trade Representative Ron Kirk. Early in February 2013 — this seems to account for President Obama’s timing — the group said talks should go ahead.

Although it is impossible to be specific about the influences on the working group, the corporate interests who promote and benefit from “free-trade” agreements were not likely absent from the room. Eurochambres, a regional network of European chambers of commerce, published the paper it presented to the working group online. Eurochambres calls for harmonization of regulations, elimination of all tariffs and “the highest possible standards of protection for investors.”

That last wish should set off alarm bells. In pursuit of “protection for investors,” Eurochambres advocates that trade negotiators “Build on the Joint Statement of Principles on the Treatment of Foreign Investment elaborated by business organization on both sides of the Atlantic.” Those “principles” include:

“[T]he rule of law, transparency and predictability in government administration, regulatory fairness, the sanctity of contracts and private property, respect for intellectual property rights, and sound macro-economic policies. … This general approach should apply to the widest possible definition of investments, including all forms of assets and tangible and intangible property; property rights such as leases, mortgages, liens and pledges; intellectual property rights; rights conferred by law or contract, such as licenses and permits; business enterprises and equity and other forms of participation in them; claims to money and to performance; and returns.”

On the other side of the Atlantic, the U.S. Chamber of Commerce — a hard-line organization that has never seen a regulation it likes or a tax that is justified — has similarly provided its wish list. The Chamber calls for the same things as its European counterpart, including a “a highest standard investment agreement.” The Chamber did go a bit further by demanding an immediate deal, insisting that negotiators:

“Complete a bilateral investment agreement between the United States and the 27 EU member countries. An updated and comprehensive bilateral agreement would improve the flow of capital, prevent discrimination against investors, and provide protection from expropriation. … The Chamber calls for a swift time frame to avoid delays from election calendars in any participating country.”

Trans-Atlantic echoes of the Trans-Pacific Partnership

These demands are staples of “free-trade” agreements, whether bilateral or multi-national. Bland-sounding calls for “equal treatment” for foreign and domestic investors and property rights only thinly mask a thicket of detail-loving devils. These platitudes form the basis of undemocratic, drastically one-sided trade agreements such as the North American Free Trade Agreement, which in turn provides the starting point for the Trans-Pacific Partnership, a negotiation being conducted in secret by 11 countries.

These agreements use the same language as that of the Big Business pressure groups quoted just above. It is not unreasonable to speculate that the Transatlantic Trade and Investment Partnership will contain rules mirroring those proposed for the Trans-Pacific Partnership. The TPP goes beyond NAFTA in several ways, via rules granting additional “rights” to multi-national corporations and further expanding the definition of “investor,” while containing no rules concerning labor, the environment, public health or safety.

For example, the TPP, if ratified, would overturn the policies of countries like Australia and New Zealand that force lower prices on medicines, significantly tighten corporate control of the Internet, and require that speculators be paid the full face value of a government bond even if bought at a deep discount from a third party.

The TPP would require disputes be judged in the International Centre for Settlement of Investor Disputes — a secret tribunal closed to the public that is an arm of, and controlled by, the World Bank. ICSID, and similar tribunals, are bodies that adjudicate disputes between investors and governments, but the judges who sit in judgment are often corporate lawyers who specialize in representing investors in disputes with governments. These tribunals issue a steady stream of rulings favoring corporate interests, and these decisions then become the standards to which future trade agreements will be held, building a floor for subsequent decisions that will be still more harsh.

The rules governing the TPP, if enacted, would require that maximizing corporate profits be the highest priority for governments, by law. Measures to reign in financial speculation, even during economic crises, would be illegal, and rules safeguarding workplace safety or the environment would be struck down as interference with corporate profits.

It is difficult to imagine that the corporations goading on the trans-Atlantic governments intend to settle for anything less. And also at risk for Europeans are laws blocking genetically modified foods — U.S. agribusinesses have sought to eliminate E.U. rules safeguarding food safety and the Transatlantic Trade and Investment Partnership may well be their route. “Harmonizing” rules ordinarily means “harmonizing” at the lowest level, and in this case that would mean the weaker safety regulations, and lackadaisical enforcement, of the U.S.

No Trans-Pacific Partnership text has ever been made available; the little that is publicly known is due to leaks published on the Internet by consumer organizations. The White House TPP page offers no substance. In its report on the most recent negotiation round, the White House provides this less than scintillating summary:

“Trans-Pacific Partnership (TPP) negotiators were pleased to report further solid steps forward in closing the remaining gaps between them during the 15th round of negotiations. … [T]he Leaders reaffirmed their mutual priority of concluding a state-of-the-art, comprehensive agreement as quickly as possible.”

The next round of TPP talks is in Singapore from March 4 to 13, where similar communiqués are likely forthcoming. Once again, it must be asked: What is being hidden?

Different ocean, but same concept

Information on the details of the Trans-Atlantic agreement are likely to be as scarce. Nonetheless, European leaders are mostly lining up in support. German Chancellor Angela Merkel and British Prime Minister David Cameron, for example, are pushing the idea. The corporate media is also lining up behind it, with “resistance” to an agreement portrayed as “interest groups” stubbornly clinging to parochial concerns. An excellent specimen of corporate ideology at work is provided by the centrist German newsmagazine Der Spiegel, which is presented not to single it out but rather because it is typical. Der Spiegel writes of potential opposition:

“Some interest groups have refused to budge. The powerful US agrarian lobby, for example, insists on unlimited access to European markets, including such products as genetically modified produce, which is controversial on the Continent. European companies, for their part, refuse to accept the diktats of US regulatory authorities regarding whether and how they can pursue state contracts. … Furthermore, promoting a trans-Atlantic agreement would allow Obama — on the eve of his planned visit to Berlin in June — to address European concerns that the US has turned away from the Continent in favor of Asia. … But in his Tuesday evening speech, Obama still lauded the benefits of a trans-Pacific trade agreement with Australia and Asian countries before he mentioned the trans-Atlantic deal.”

The primary controversy, a reader might be led to believe, centers on a potential lack of resolve in giving corporations what they want. That there might be interests other than that of corporate profits — say, workers’ ability to have jobs with good pay and dignity, or a desire not eat food untested and unlabeled, or avoiding environmental damage — are not mentioned. Such matters are immaterial, evidently, at most the concern of “interest groups.”

The only clue as to the contents of what a Transatlantic Trade and Investment Partnership might contain are in the final report issued by the High Level Working Group on Jobs and Growth. Two key passages in the final report’s six pages state:

“The [High Level Working Group] recommends that a comprehensive U.S.-EU trade agreement should include investment liberalization and protection provisions based on the highest levels of liberalization and highest standards of protection that both sides have negotiated to date. … The HLWG recommends that the two sides explore new means of addressing these ‘behind-the-border’ obstacles to trade, including, where possible, through provisions that serve to reduce unnecessary costs and administrative delays stemming from regulation.” [page 3]

These provision could include:

“[R]educ[ing] redundant and burdensome testing and certification requirements … [and inserting p]rovisions or annexes containing additional commitments or steps aimed at promoting regulatory compatibility.” [page 4]

Stripped of bureaucratic niceties, what the above passages mean is that the most one-sided trade agreements (and tribunal interpretation) will be in force. For now, that arguably means the standards of NAFTA, under which taxation and regulation constitute “indirect expropriation” that require  compensation for corporations. The Trans-Pacific Partnership, however, would supersede NAFTA if implemented, mostly because it would be more draconian but also because Canada and Mexico have formally joined the nine original TPP negotiating countries, making NAFTA superfluous. To add to the complexity, Canada is negotiating its own secret trade pact with the E.U. and, like the U.S. Congress vis-à-vis the TPP, Canadian members of parliament are being left in the dark.

Market forces demand a race to the bottom

In the High Level Working Group’s six-page report, environment and labor safeguards are discussed in one paragraph. Here it is:

“The EU and the United States are both committed to high levels of protection for the environment and workers. The HLWG recommends that the two sides explore opportunities to address these important issues, taking in to account work done in the Sustainable Development Chapter of EU trade agreements and the Environment and Labor Chapters of U.S. trade agreements.” [page 5]

There are no effective environment or labor chapters in U.S. trade agreements, only boilerplate language that is meaningless. If that is the standard, then labor rights, workplace safety rules and environmental safeguards will be under sustained assault under any Trans-Atlantic trade agreement. Protections for the environment and employees are barriers to corporate profits, and will be treated as such. Regulations will be “harmonized” at the lowest level because that is what the “market” demands — the market simply being the aggregate interests of the most powerful industrialists and financiers.

In the context of European Union elites sparring over financial policy, Chancellor Merkel is not a stubborn holdout nor obsessed with Weimar-era inflation; she is simply reminding other national political leaders that financial harmonization will conform to the tightest policy among them and Germany so happens to have that tightest policy. Trade harmonization, regardless of where the borders are drawn, will follow a similar dynamic. The United States will seek to impose its looser regulations and weaker labor laws on Europe, and further weaken its own.

That is not because there is something inherently evil about U.S. officials or due to some particular moral failing of the Obama administration, but because the U.S. government, like all capitalist countries, reflect the dominant interests within their countries. Large industrialists and financiers dominate their societies through control of the mass media and a range of other institutions to the point that their preferred policies become, through heavy repetition, the dominant ideas across society and the ideas adopted by the political leaders who become intellectually and financially dependent on them. That is a crucial part of the puzzle as to why governments around the world enter into agreements that are so one-sided against themselves.

Coordinated international struggle is the only counter-force that can block these draconian trade agreements.

World Bank’s call for slowing global warming ignores own role

Global warming appears, or so it seems, to have begun to be taken more seriously this week as none other than the World Bank issued a report sounding the alarm bells. But let us not grow warm in our hearts just yet that corporate leaders have suddenly decided to yield to science and reality.

What we have here is a case of truly monumental hypocrisy. The policies of the World Bank and its sibling, the International Monetary Fund, have constituted non-stop efforts to impose multi-national corporate control, dismantle local democratic institutions and place decision-making power into the hands of corporate executives and financiers, the very people and institutions that profit from the destruction of the environment.

The World Bank’s report, “Turn Down the Heat,” prepared for it by the Potsdam Institute for Climate Impact Research and Climate Analytics, does incorporate the latest thinking of climate scientists. It paints a dire picture of a world in which the average temperature will increase by four degrees Celsius (seven degrees Fahrenheit) by the end of the 21st century without large-scale policies to reverse the trend. Among the effects of such a rise in temperatures, according to the report:

“[T]he inundation of coastal cities; increasing risks for food production potentially leading to higher under and malnutrition rates; many dry regions becoming dryer, wet regions wetter; unprecedented heat waves in many regions, especially in the tropics; substantially exacerbated water scarcity in many regions; increased intensity of tropical cyclones; and irreversible loss of biodiversity, including coral reef systems.”

The World Bank report advocates that the century’s temperature rise be held to less than two degrees Celsius. The bank says that “more efficient and smarter use of energy and natural resources” can reduce the climate impact of development “without slowing poverty alleviation or economic growth.” Despite the bank’s neo-liberal agenda, a goal stated in these terms is consistent with Center-Left political parties around the world. Among the initiatives proposed by the report are:

“[P]utting the more than US$ 1 trillion of fossil fuel and other harmful subsidies to better use; introducing natural capital accounting into national accounts; expanding both public and private expenditures on green infrastructure able to withstand extreme weather and urban public transport systems designed to minimize carbon emission and maximize access to jobs and services; supporting carbon pricing and international and national emissions trading schemes; and increasing energy efficiency.”

In other words, the very economic system that has brought the world to the brink of a disaster that could arrive in the lifetimes of many people alive today is supposed to magically eliminate the problem, and without significant changes to consumption patterns. Alas, that is wishful thinking.

The very energy corporations that stand to most profit from continued high energy use and increasingly damaging resource-extraction techniques are the biggest sources of misinformation intended to deny the reality of global warming or to claim that climate change is “natural” and to do anything about it would wreck the economy.

Increase in extreme weather events

Those executives who peddle that ideology will have long ago lined their pockets with outsized profits and will have left this Earth by the time the environmental bill comes due. Last month’s Hurricane Sandy, which devastated the coasts of New Jersey and New York, can’t be seen as anything other than a harbinger of what is coming; similar to the heat waves that destroyed crops in Russia and North America in 2010 and 2012, respectively, and the dramatic retreat of the Arctic ice cap.

Of course, no single storm or single heat wave can be attributed to global warming. But global warming increases the odds of destructive, deadly weather events. One measure is the number of “extreme” weather events (top or bottom ten percent of extremes in temperature, precipitation, and drought) as measured by the U.S National Oceanic and Atmospheric Administration. Through the end of October, 38 percent of the contiguous U.S. land mass had experienced at least one of these extreme weather events in 2012, the second-highest figure since records began to be kept in 1910. The average for the past century is 20 percent; all but four years since 1991 have exceeded this average.

Consistent with the initiatives proposed by the World Bank report, the Obama administration has advocated “green capitalism” to deal with global warming, although in practice (particularly during the just-concluded presidential election campaign) Barack Obama has offered little better than the standard head-in-the-sand ideas of ramping up oil and gas extraction, salted with chimera like “clean coal” and “safe nuclear energy” — two concepts that are the epitome of oxymoronic construction.

Coal throws more global-warming carbon dioxide into the atmosphere than any other energy source and the meltdowns at Fukushima and Chernobyl should be sufficient warnings against building more nuclear power plants even before we contemplate the impossibility of safely disposing nuclear waste.

Energy companies continue to sue to overturn regulations

Hydraulic fracturing of rock — or “fracking” — using jets of water and chemicals to force natural gas from underground is the latest offer from the world’s energy companies. Bitter battles across North America are raging over fracking and the pollution and destruction of water sources left in its wake. But lest we believe the latest World Bank report might induce a pause for thought, consider this: A U.S.-incorporated energy firm, Lone Pine Resources Inc., is suing under the North America Free Trade Agreement (NAFTA) to overturn Québec’s regulations against fracking.

Lone Pine, which is actually headquartered in Calgary, Alberta, despite its formal incorporation in the U.S. tax-haven state of Delaware, is seeking $250 million in compensation, reports The Globe and Mail newspaper of Toronto. (More corporations are incorporated by far in Delaware than any other U.S. state because of its laws specially tailored to benefit corporate executives; the state even has a special court that only adjudicates business disputes.)

Technically, Lone Pine is suing the Canadian government because only the three national governments can be sued under NAFTA. The company is suing under NAFTA’s Chapter 11, which authorizes corporations to sue over any regulation or other government act that violates “investor rights,” which means any regulation or act that might prevent the corporation from earning the maximum possible profit. The Wall Street Journal reports that Québec “banned shale-gas exploration in parts of the Saint Lawrence Valley and revoked previously issued mining rights as it studied the environmental consequences.”

NAFTA allows a Canadian company to sue the Canadian government in a way it wouldn’t otherwise have been able to do — an excellent deal for polluters.

Because the rules of NAFTA are heavily tilted in favor of business and against labor or environmental regulation, almost every case brought to a tribunal under NAFTA ends with either a hefty payout to the suing corporation or an overly generous settlement by governments seeking to avoid an even bigger payout, and a reversal of regulations passed by democratic governments. These decisions are handed down in secret tribunals in which many judges are attorneys who specialize in representing companies in disputes with governments.

The rules of NAFTA, draconian as they are, are merely the starting point for still harsher rules under the secret Trans-Pacific Partnership being negotiated by nine countries. Moreover, the TPP would require the use of a tribunal controlled by the World Bank, a tribunal already in common use under many existing trade agreements. Each time a tribunal overturns a regulation or protection, it becomes a precedent — that is, a new starting point from which further corporate control of national laws can be launched.

World Bank policies fuel global warming

Environmental laws are frequently the target of corporate assaults under free-trade rules, and the most frequent initiators of these assaults are energy and chemical corporations. Tribunals controlled by the World Bank or other institutions that promote corporate globalization ensure that environmental, labor and other legal protections are eviscerated, thereby accelerating the destructive activities that fuel global warming.

The World Bank has long imposed harsh austerity on countries around the world, in exchange for drowning those countries in debt, which then gives multi-national corporations and itself, which enforces those interests, still more leverage to impose more control, including heightened ability to weaken environmental and labor laws.

The bank also plays a direct role in global warming, having provided billions of dollars to finance new coal plants around the world in the past few years.

The World Bank is a key organization in the concatenation of processes that has brought the world to the brink of catastrophic climate change. To issue a report on the likely future destruction to be wrought by global warming without acknowledging its own role and without calling for a fundamental change in the global economic system that it enforces — which is the root cause of a potentially runaway chain of environmental disasters — is beyond chutzpah.

Capitalism is incapable of reversing global warming. All of its incentives are for private profit without regard to public effect. The maximization of profit in the short term is the aim of a capitalist corporation (indeed, for one listed on a stock exchange, it is required by law to have no other purpose). Its incentive, then, is to shed costs whenever possible — not only to reduce wages, but to offload the costs of pollution and other public nuisances onto governments and, ultimately, taxpayers.

The rigors of competition require that ever bigger profits be made and expansion continually undertaken, under pain of going under if a competitor does this more successfully. Because of the necessity of endless growth, and the lack of need to take into account pollution and of the amount of carbon dioxide thrown into the atmosphere because those are not assigned to the corporate bottom line, every systemic incentive exists to extract and use more natural resources, regardless of long-term costs.

It is impossible for such a system to clean up its own mess. At best, it might, in the future, innovate new technologies for renewable energy, but not in a rational manner. The Chinese government has so over-invested in solar-energy equipment, for example, that it is estimated that capacity is now three times more than demand. This explains why U.S. solar-equipment companies are going out of business despite being granted significant government subsidies.

Capitalism has developed to the point where the very existence of humanity could be at stake in the future; where ever more inequality leads to deepening crises and an inability for humanity to deal logically with these crises, even ones that carry the potential for catastrophic destruction. What could be more unsustainable?

Trans-Pacific Partnership trade pact more draconian than NAFTA

By Pete Dolack

Imagine a world in which which labor safeguards, safety rules and environmental regulations will be struck down because a multi-national corporation’s profits might be affected. A world in which measures to reign in financial speculation are illegal. A world in which the task of governments, codified in law, is to maximize corporate profits.

Imagine a world in which corporations can bypass national laws and courts when they are in a dispute with a government, and instead can have their dispute adjudicated by a closed tribunal controlled by their lawyers.

Unfortunately, the above is not dystopian science fiction; it is the reality of the top-secret Trans-Pacific Partnership. If you like NAFTA, you will love the TPP.

Haven’t heard of the Trans-Pacific Partnership? There is good reason. It is a proposed trade agreement being secretly negotiated that would not only codify the one-sided rules heavily favoring corporate interests exemplified in the North American Free Trade Agreement, it would go beyond them. And many of the harshest rules proposed to be included in the TPP are being pushed by the Obama administration.

Nine countries — Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States — have negotiated for four years. No text has ever been released to the public, and even the U.S. Congress has been left in the dark as to the TPP’s contents. That we know anything at all about it is due to leaks. A portion of the text, the chapter covering investment rules, is posted at http://tinyurl.com/tppinvestment.

What the TPP represents is multi-national corporations going beyond lobbying for deregulation, bending rules and decisively influencing government policy to having their interests in profit maximization regardless of impact written into international law and controlling the tribunals that will adjudicate corporation/government disputes. “Free trade” agreements have become a favored route toward this corporate goal. In the nearly two decades that NAFTA has been in force among Canada, Mexico and the United States, there has been a steady procession of corporations filing complaints alleging that regulations “harm” them.

Thus we have had the spectacle of a U.S. corporate parcel-delivery service suing Canada in an attempt to have the Canadian postal system dismantled and chemical companies suing because a chemical they produce has been banned because it is poisoning water supplies. The key NAFTA provision is Chapter 11, which codifies the “equal treatment” of business interests in accordance with international law and enables corporations to sue over any regulation or other government act that violates “investor rights,” which means any regulation or act that might prevent the corporation from earning the maximum possible profit.

The usual result is either the complaining corporation wins its case or the defendant government settles on terms advantageous to the corporation to avoid a worse result. Multi-national corporations don’t win every time — for instance, Canada was graciously allowed to retain its postal service. The TPP is designed to tilt the scales still more heavily in favor of “investors” — not only via rules granting more “rights” to multi-national corporations, but further expanding the definition of “investor.” There are extensive rules governing the “right” to an near guarantee of profits, but no rules concerning labor, environment, public health or safety.

NAFTA, as draconian as it is, is a starting point. The TPP’s extraordinarily one-sided rules, which go beyond NAFTA in several ways, are intended to be a new floor in the ongoing effort to lock in the domination of industrialists and financiers through the multi-national corporations that they control. The TPP is intended to be “scalable” — that is, other countries can join but are forbidden to oppose any measure already agreed upon. Just two months ago, Canada and Mexico accepted invitations to join, so it is quite conceivable that TPP may supplant NAFTA.

The U.S. watchdog group Public Citizen issued an analysis of the leaked TPP investor chapter earlier this summer. Sounding the alarm, Public Citizen said:

“Over $350 million has been paid to investors by governments under the investor-state provisions in NAFTA alone over toxic waste dump permits, logging rules, bans of toxic substances and more. Currently, there are over $13 billion in pending corporate “investor-state” trade pact attacks on domestic environmental, public health and transportation policy. And, mere threats of such cases have repeatedly resulted in countries dropping important public interest initiatives, exposing their populations to harm that could have been avoided. Yet the leaked text shows that while TPP countries have agreed to impose binding obligations on themselves to provide foreign investors an array of extraordinary new privileges, the TPP countries have not agreed to health, labor or environmental obligations to be required of investors.”

The Public Citizen report notes that the use of international tribunals to overturn regulations has increased dramatically in the past decade:

“Over $719 million has been paid out under U.S. Free Trade Agreements and Bilateral Investment Treaties alone — 70 percent which are from challenges to natural resource and environmental policies, not traditional expropriations. Tobacco firms are using the regime to challenge tobacco control policies, including a case by Phillip Morris against Australia. Absent substantial changes to the leaked text, TPP would greatly increase the number of investor-state attacks on public interest policies and would expose governments to massive new financial liabilities.”

The use of international tribunals is an aspect of bi-lateral and multi-lateral trade agreements often overlooked. The TPP would require the use of the International Centre for Settlement of Investor Disputes (ICSID) — an arbitration board that is an arm of, and controlled by, the World Bank. Cases that go before one of the Centre’s tribunals are decided by a panel of three judges that are selected from a roster. The judges are appointed by the national governments that have signed on to ICSID, which are most of the world’s countries.

Eight of the judges have been appointed by the United States. Each is a lawyer whose career has been spent in the service of large corporations. Six are currently partners in some of the world’s most formidable corporate law firms, one is an academic who formerly was a corporate lawyer and one is a lobbyist for a business group that seeks to codify pro-corporate trade rules under law. Five of the eight U.S.-named lawyers have been counsel to various Republican Party administrations and several of the eight specialize in representing corporations before international arbitration boards.

These are the U.S. panelists who are among those judging the merits of corporate claims against government regulations:

  • Fred Fielding: An attorney who bounces back and forth between Republican administrations and corporate law firms; among his clients has been the mercenary military contractor Blackwater.
  • William Park: Currently a law school professor but has practiced with three corporate law firms and has been an arbitrator on many business-arbitration boards.
  • Daniel Price: A corporate lawyer who represents companies in international arbitration and a former economic adviser to George W. Bush.
  • John M. Townsend: A corporate lawyer who represents pharmaceutical companies and specializes in representing companies in arbitrations against governments; he is also a trustee of a business lobbying group.
  • J. Caleb Boggs III: A corporate lawyer who specializes in representing financial institutions and other clients before regulators and helped write a law deregulating banks while a Senate aide.
  • William A. Burck: A corporate lawyer who specializes in representing companies and corporate officers in disputes with U.S. and other governments; he is a former legal adviser to George W. Bush.
  • Ronald A. Cass: The chair of a lobbying group that seeks to tilt international trade law further in favor of business; he was a trade representative for two Republican administrations.
  • Emmet Flood: A corporate lawyer who represents companies in disputes against government regulations and a former counsel to George W. Bush; among his past clients are the Koch brothers.

The rules that panelists will adjudicate would supersede national laws. Article 12.7 of the TPP, for instance, provides a long list of prohibitions against government actions; under it, laws imposing capital controls (even to ameliorate a crisis), rules governing domestic content of products or any protections of any domestic industry would be illegal. It then provides a generic exception allowing environmental or other measures “that are not inconsistent with the Agreement; necessary to protect human, animal, or plant life or health; or related to the conservation of living or non-living exhaustible natural resources.”

That exception, however, is meaningless. It specifically requires that excepted rules must be “not inconsistent with the Agreement” — and that is the towering thorn sticking out of the minuscule rose. The key sentence opens Article 12.6: “Each Party shall accord to covered investments treatment in accordance with customary international law.” The “Party” here are national governments, and the “customary international law” is that already established by NAFTA and the decisions made by ICSID and similar arbitration bodies concerning disputes under NAFTA and other trade agreements. Those decisions skew heavily toward corporate complainants.

Venezuela recently became the third South American country to withdraw from ICSID; in doing so, the country’s foreign ministry said ICSID “has ruled 232 times in favor of transnational interests out of 234 lawsuits received throughout its history.” A 2007 report issued by the Institute for Policy Studies and Food and Water Watch, “Challenging Corporate Investor Rule,” said multi-national corporations have won 70 percent of the cases (it did not specify how many of the remainder were a loss for the corporation nor how many were not decided or withdrawn). These tribunals are conducted in secret; only two ICSID cases have been conducted with public attendance in its history.

The World Bank is one of the principal bodies imposing austerity on countries around the world; it routinely conditions loans to governments of developing countries on the swift privatization of state-owned enterprises and public utilities, typically conducted at fire-sale prices as salivating corporate executives are aware of the hammer being held over the selling government. When the buying corporation decides it has not made the profits it expected, it can file a claim heard by ICSID, which is controlled by the very same World Bank.

In one notorious case, the World Bank forced the privatization of the water system in the Bolivian city of Cochabamba. Bechtel, the company that was handed the water system as the sole bidder in a secret process, charged a sum equal to one-quarter of city residents’ average household income and imposed a contract provision banning the collection of rainwater. After massive local protests backed by a global campaign forced it to leave the city, Bechtel sued Bolivia for US$50 million in damages and lost profits although its investment is believed to have been less than $1 million and Bechtel’s revenues are six times the size of Bolivia’s gross domestic product.

Bechtel settled without receiving a payment only because of massive international pressure and because Bolivians continued to resist in large numbers despite being repeatedly fired upon. That pressure was necessary as, according to Earthjustice, World Bank officials refused to disclose when or where the first hearing in the case would take place.

That is a very rare ending. Although developing countries are most often the targets of ICSID actions, regulations anywhere can be overturned. For instance, Canada was sued under the provisions of NAFTA by a U.S.-based chemical company after it banned the use of a gasoline additive already banned in the U.S. because it is a known toxic agent. Thanks to ICSID, Canada had to reverse its ban, pay millions of dollars to cover the company’s “lost profits” and issue an apology to the chemical company.

Among the features of NAFTA to be replicated in the TPP are that:

  • Governments pay attorney costs, win or lose, in addition to paying judgments.
  • Taxation and regulation constitute “indirect expropriation” mandating compensation (a reduction in the value of an asset is sufficient to establish expropriation rather than a physical taking of property as required under U.S. law).
  • Older decisions become precedents for further expansions of investor “rights” and will be read as the “evolving standard of investor rights” required under the TPP.
  • No mention of labor rights, nor any standards for environmental, health or safety that must be met.

A London Court of International Arbitration panel, ruling in July 2005 for a unit of the Occidental Petroleum Corp. in a case heard under the U.S.-Ecuador bi-lateral investment treaty, declared that any change in business conditions constitutes a violation of “investor rights.” If such a ruling is accepted as precedent, any attempt at regulation is potentially illegal.

Among the features of the TPP that go beyond NAFTA are:

  • An expansion of who or what constitutes an “investor” — extending those eligible to file a claim to anyone who applies for a permit or license, or who “channels” resources or capital to set up a business, without placing any limits on what qualifies for such a status.
  • No language to block frivolous claims.
  • The U.S. is seeking to include government bonds as a covered investment; if that stands, speculators would have the right to recover the full value of government bonds bought at discounted prices.
  • Requiring new intellectual property laws that would criminalize many acts not currently classified as such.
  • Significantly tighten corporate control of the Internet and force service providers to hand over personal data.

A separately leaked section of the TPP, covering pharmaceutical products, contains this interesting item on its cover page: “Declassify on: Four years from entry into force of the TPP agreement or, if no agreement enters into force, four years from the close of the negotiations.” What is being hidden? New monopoly rights for pharmaceutical companies and the ability to overturn the policies of countries such as Australia and New Zealand that force much lower prices on drugs, policies that U.S.-based pharmaceutical companies wish to overturn. In addition, Citizens Trade Campaign reports:

“This U.S. intellectual property proposal, which rolls back initial reforms made in a trade pact that the Bush administration signed with Peru only four years ago, would lengthen pharmaceutical monopolies, eliminate safeguards against patent abuse, grant additional exclusive controls over clinical trial data and favor the giant pharmaceutical companies’ monopoly interests at every stage.”

Médecins Sans Frontières/Doctors Without Borders similarly reports that:

“The Obama administration is walking away from previous efforts to ensure that developing countries can access affordable medicines, setting a dangerous new standard that will likely be replicated in future trade agreements with developing nations. The administration is touting a so-called ‘access window’ as a mechanism to boost access to medicines. In fact, the administration is confusing access with affordability. The ‘access window’ is all about getting brand-name drugs to market faster, and giving their producers longer monopoly rights that prevent price-lowering competition and keeping medicines out of the hands of the millions of people who need them.”

The White House claims that “The Obama Administration has been working in partnership with Congress and consulting closely with stakeholders around the country to ensure TPP addresses the issues that American businesses and workers are facing today, and may confront in the future.” That clearly is not true, as senators and representatives are demanding disclosure. Nor does any of the agreement’s text appear on the Web page dedicated to the TPP.

Executives and lobbyists from some of the largest corporations on the planet — commanding revenues much larger than the gross domestic products of the smaller TPP countries — are meeting in secret with government officials to give themselves yet more power and control.

Corporate-written rules for self-benefit are intimately connected with financiers manipulating markets and benefiting from the austerity they insist governments impose. Industrialists extract the surplus value from their from their workers that becomes profit and financiers provide the whip that intensifies the process and create the speculative instruments that profits are poured into. We can have corporate dictatorship, or democracy. But not both.

NAFTA and European Union: Different sides of the Atlantic but same function

By Pete Dolack

The logic of the multi-national euro currency is tighter economic integration and loss of popular sovereignty. Unless the eurozone breaks up and its users return to their own national currencies, pressure will be built by the “markets” for further centralization and harmonization of rules. In plain language, tightened control by big capitalists.

The eurozone, functionally, is much the same as the North American Free Trade Agreement across the Atlantic. NAFTA makes corporate profiteering paramount by eroding the ability of the governments within it to enforce regulations; places decision-making in the hands of unaccountable and undemocratic arbitration boards convened by either the commercial arm of the United Nations or the World Bank; and elevates the interests of large corporations and financiers above all other human considerations.

(There are the occasional conspiracy-mongers who claim that NAFTA is a precursor to the dismantling of the United States in favor of some “North American republic” and that the dollar will be eliminated in favor of a regional currency, but besides the fact that these feverish Right-wing conspiracies are laughable on their face they completely ignore the fact that U.S. capitalism needs U.S. military might, that the world capitalist system needs a center with the requisite financial and military clout to act as the enforcer, that the U.S. relies on the dominance of its national currency to be able to run budget and trade deficits, and that the nationalistic U.S. public would rise up, in arms if necessary, against any such idea.)

The key NAFTA provision is Chapter 11, which codifies “equal treatment” in accordance with international law and enables corporations to sue over any regulation or other government act that violates “investor rights,” which means any regulation or act that might prevent the corporation from earning the maximum possible profit. Thus we have had the spectacle of a corporate parcel-delivery service suing Canada in attempt to have the Canadian postal system dismantled and chemical companies suing because a chemical they produce has been banned because it is poisoning water supplies.

The idea that safe drinking water is considered a trifle next to the maximization of profits, sadly, is not a mordant joke. Any company that has its shares traded on stock exchanges is legally required to maximize its profits for shareholders, to the exclusion of all else — under capitalism, safe drinking water is unimportant. (Except, of course, for the bottled-water companies that drain aquifers to supply their products.)

Although Canada, which has the most stringent regulations of the three NAFTA countries, has won five decisions before the arbitration boards, three of them were on technicalities in which the merits of the cases were not ruled upon. Only twice has the Canadian government won a clean victory in the dozens of cases brought against it. Just this week, The Globe and Mail newspaper of Toronto reported that Exxon Mobil Corp. won a Chapter 11 arbitration case against the province of Newfoundland and Labrador because Exxon and a partner company were required to conduct research before commencing projects.

A U.S. watchdog group, Public Citizen, summed up the rules of NAFTA and other trade treaties in this succinct fashion:

“This ‘investor-state’ enforcement mechanism elevates private firms and investors to the same status as sovereign governments, effectively privatizing the right to enforce public treaties’ expansive new investor rights. There is no such private enforcement for labor rights or environmental standards. … The [free-trade] pacts provide firms a way to attack other countries’ domestic public interest laws and skirt their court systems.”

If readers in Canada, the United States or Mexico have no recollection of voting on any of this, there is good reason.

Similarly, the financiers who dominate European Union policy are not subject to any democratic accounting, either. And under the rubric of not allowing a perfectly good crisis to go to waste, the ongoing eurozone crisis is being used as leverage to install an ever harsher régime. Doing so is completely logical within the imperial construct of the European Union, which is a supra-national institution to impose corporate domination on a reluctant population. National governments are not insulated from popular opinion, but a supra-national structure can impose dictates on those governments, which can then tell citizens that is has “no choice” but to adhere to them so that the country can remain “part of Europe.”

Concomitantly, European capitalists desire the ability to challenge the United States for economic supremacy, but cannot do so without the combined clout of a united continent. This wish underlies the anti-democratic push to steadily tighten the E.U., including mandatory national budget benchmarks that require cutting social safety nets and policies that are designed to break down solidarity among wage earners across borders by imposing harsher competition through imposed austerity.

The E.U., in its current capitalist form, is a logical step for business leaders who desire greater commercial power on a global basis: It creates a “free trade” zone complete with suppression of social accountability while giving muscle to a currency that has the potential of challenging the U.S. dollar as the world’s pre-eminent currency.

A difficulty for E.U. business elites is that nationalism tends to act as a disorganizing force within the E.U., whereas nationalism is a potent unifying force in China and the United States. But nationalism, as always, has its uses: Instead of uniting on their common interests across borders, all too many Europeans are attacking one another on a national basis. Nationalism, ordinarily an easily manipulated ethos used to provide a unifying glue within countries that are otherwise consciously atomized by capitalist pressures and individualist propaganda, becomes a divide-and-conquer tool par excellence in a supra-national context. And so we have the dispiriting spectacle of venomous attacks on “lazy Greeks,” “arrogant Germans” and the rest of the assortment of tired clichés.

Nationalism is fine for working people, but an impediment for business elites who are increasingly bold in calling for economic policy to be directed by Brussels. In the past week, an assortment of E.U. officials, joined by national leaders elected and unelected, said the E.U. must be bound together more tightly. Arrogant and hypocritical as they may be, these officials are simply enunciating the logic of E.U. capitalism. The most prominent tangible form of these calls are for the issuance of “euro bonds” — government bonds to finance debt issued by the European Central Bank in place of bonds issued by individual national governments.

The new French government has endorsed the issuance of “euro bonds,” adding to the momentum. The proximate cause of pleas for the creating of “euro bonds” is that too many eurozone governments can’t afford to borrow at the high interests rates demanded by financiers and the rich who buy bonds (in lieu of paying taxes, which would end the need for selling bonds in such large amounts). The price of pooling together the risk of all E.U. governments by issuing such bonds is much closer economic integration. And what that means is financiers controlling policy to an even greater degree than they already do.

Financiers, that is, as an international interest group; not German bankers or Germany as a country. The corporate news media continues to cover the ongoing crisis and its slow-motion developments as a contest of wills between Germans (or Chancellor Angela Merkel) and the Southern rim of the E.U. with France as a buffer in between. But, as I have previously written, it is German industrialists, not German working people, who are the beneficiaries of German government policy.

Germany has become reliant on exports as German workers have absorbed a decade of wage cuts, leaving domestic demand inadequate to soak up German production or to pick up the slack when export markets soften. German exports have become more competitive on the backs of German employees, making it more difficult for other eurozone countries to remain competitive because, by not having their own currency that they can devalue, they can’t use that route to give their exports a boost. Thus, German industrialists have prospered through the widespread adoption of the euro, which has “locked in” their competitive advantages.

German, French and other bankers earned fat bonuses because the euro also made it easier for them to make loans to the Southern rim, which also enabled those countries to buy more German products. In turn, deficits mount and production is shuttered in countries such as Greece (where the shipping industry, the rich and even many private-sector middle class people don’t pay taxes), and the price for more loans is more harsh austerity.

But the money doesn’t go to the Greek budget, it goes right back to the banks. The 130 billion euro bailout of Greece is used almost exclusively to service the interest on Greece’s debt — not even to pay down the principal! The so-called “troika” — the European Central Bank, the International Monetary Fund and the European Commission — wire Greece the money, which is almost immediately sent right back. Most of the small amount that is retained by the Greek government is used to bail out Greek banks. The price for this? An unemployment rate of 22 percent and rising, pay cuts of 40 percent for those still employed and large numbers of small businesses closing.

The troika went so far as to demand that the Greek government change its constitution to ensure that banks are paid back before there is any spending on social programs. That is a taste of what will be experienced across Europe if more power is concentrated in the hands of unelected and unaccountable officials at the European level. A de facto financier dictatorship, although one to benefit big industrialists as well as financiers, because financiers are dependent on big industrialists to generate the profits that are poured into speculation (nor is there a neat separation between the two). For working people across Europe, the program can be summed up in two words: permanent austerity.

And not even German workers, who have acquiesced to their unions agreeing to a decade of wage cuts in exchange for job security, will be immune. German workers’ living standards are slowly eroding, and when German exports slow or decline because buyers in other advanced capitalist countries buy fewer of their their products because of austerity and buyers in developing countries like China buy less because they can no longer sustain the pace of investment in infrastructure and industrial capacity, austerity will hit Germans. The route to German industrialists maintaining their profits under these future conditions will be either deeper cuts to wages, an end to job security, export of production to places with much lower wages or a combination of these.

The alternative to harmonizing economy policy among the eurozone countries (harmonizing with the tightest policy among them) is for the eurozone to break up, and countries to resume using their own currencies and setting their own policies, which would at least be subject to elections, and provide space for policies other than neoliberal austerity.

It is no surprise, then, that centralizing economic policy is the preferred route for European business elites. The arguments among them are over details — Chancellor Merkel is not a stubborn holdout nor obsessed with Weimar-era inflation; she is simply reminding other national political leaders that the harmonization will conform to the tightest policy among them and Germany so happens to have that tightest policy. None of the eurozone’s national leaders are in any sense reducible to “puppets,” but their perceived national interests are distorted by whatever consensus their capitalists arrive at, which in turn are determined by larger market forces. Big industrialists and financiers dominate their societies through control of the mass media and a range of other institutions to the point that their preferred policies become, through repetition, the dominant ideas across society and the ideas adopted by the political leaders who become dependent on them.

Similarly, “markets” seek regulatory harmonization within NAFTA countries at the level of the weakest regulations. Governments must respond because capitalists can move production at will, leaving everyone else at their mercy.

Such is the logic of “markets,” which are not the disembodied forces of nature so often portrayed but are simply the interests of the most powerful capitalist elites. It is futile to expect anything different from their system.