More trade disasters ahead

In our last discussion of the dangers posed by the current round of free trade deals under consideration in the US, Europe and Asia a while back, we noted (as have others) the potential of these deals to undermine domestic legislation if that legislation negatively affects the potential profitability of a company. Both NAFTA and the World Trade Organization (WTO) have this sort of mechanism, wherein a company affected by domestic legislation can appeal to the WTO to be compensated for the potential financial impact, or ask for fines against the country found guilty of trade agreement violations. This mechanism of trade agreements is clearly financial blackmail, designed by multinational corporations (mostly American, but a fair number of European and Asian companies as well) to prevent domestic legislation covering stuff like pesky environmental regulations, or recurring European attempts to ban beef hormones. This sounds very bizarre, of course—who in their right mind would tolerate this? But the US does, as do all signatories to the agreements that created the WTO and NAFTA. As we have just been reminded.

Recall that the Obama administration cancelled that incredible boondoggle, the Keystone Pipeline, several months ago, on a number grounds, global warming chief among them. This was the sensible decision—the last thing we need is more pipelines carrying a product that is going to be increasingly less used as time goes by, and which is being replaced by a variety of energy and transportation technologies. This is a process, not an event, but it is under way, and the end game here is weaning ourselves off of fossil fuels. However, companies that depend on fossil fuels, including pipeline operators, aren’t going to go quietly into that good night without a struggle. So TransCanada, the company responsible for pushing Keystone (among many others, admittedly), has decided to fight back. And they’re doing it through trade agreements.

Specifically, TransCanada has filed a suit against the American government for the loss of potential profits associated with the Keystone cancellation. $15 billion of potential profits, to be more exact. The number is a bit rich, frankly, given that the estimated cost of the project was about $8 billion, but who’s counting? The suit is being brought under NAFTA, and may be a precursor to what we can expect if the current trade agreements under consideration come into effect.

Obama’s support for the current trade deal proposals now appears a bit ironic, and maybe misplaced, although we’ve always thought that one of Obama’s weaknesses has been his willingness to accommodate the interests of American multinationals. And just what, exactly, is the downside here? The Institute for Agricultural and Trade Policy (IATP), one of our generally reliable sources, notes:

The standing of TransCanada to sue the American government is provided not in any formal U.S. legal judiciary setting, but through rules laid down in a trade regime, NAFTA. The terms of this agreement, and other similar trade agreements, are designed to protect the rights of foreign investors over the rights of the states in which they are investing.

If successful, the suit will incur more losses to U.S. citizens than those associated with sovereign rights and national security. TransCanada is asking for $15 billion dollars in lost potential future profits. Furthermore, in an additional suit filed in Houston, Texas, TransCanada is seeking to limit the power of the President of the United States in setting U.S. energy policy by claiming that the Keystone decision was unconstitutional.

The really bad news is that TransCanada has a strong case for saying so. Why? Because we have entered into trade agreements that DO trump our national sovereignty and we are heading straight into more of them with our eyes wide shut….

But there may be an upside to all of this, as the IATP points out:

Thanks to TransCanada’s extraordinary actions, the lid has blown off intentionally obscure provisions of NAFTA that favor corporate interests over national sovereignty and security in a way that Americans can see and feel. That means that new trade agreements, including the Trans-Pacific Partnership (TPP), and the Trans-Atlantic Trade and Investment Partnership (TTIP), will no longer be able to hide similar provisions that are, by design, intended to grant special legal rights to corporations and further erode the national sovereignty of the U.S. and each and every nation that signs them.

So there may be a potential upside here if it derails the current trade agreement proposals. What the likelihood of that is, I can’t say. But it’s clear that NAFTA, and these other trade agreements, have significant downsides, many of which were pointed out at the time, and some of which have become more obvious as time has passed.

Want another example? The US Congress passed legislation in December (as part of the budget reconciliation bill) that rescinded country of origin labeling on beef and pork sold in the US—in supermarkets, or anywhere else, for that matter. One is tempted to blame the ridiculous Republican Congress for what appears to be a completely bone-headed move, and normally I would be more than happy to do that—in most cases, the current US Congress is eminently deserving of whatever opprobrium is heaped upon it. But I am not without sympathy in this instance, since, as Forbes pointed out, “…Congress repealed the country-of-origin-labelling rule (COOL) on beef and pork after the World Trade Organization (WTO) imposed $1 billion in retaliatory import tariffs against United States if the rule was not overturned.” On what grounds? Hah, you may well ask. As Forbes expounded,

Canada and Mexico had argued that the mandatory U.S. labeling program discriminated against meat imports and violated WTO limits on what sorts of product-related “technical regulations” WTO signatory countries are permitted to enact. Meatpackers also complained that the cost of complying with the COOL program was too burdensome. The United States has lost two rulings and two appeals with the WTO regarding COOL since 2011. The import tariffs were authorized by the WTO on December 7th.

As in so many other cases, the grand promises made about free trade agreements turn out to not only have been exaggerated, but the downsides are problematic. Are countries and companies that currently receive coal exports from the US going to take the US to the WTO on the back of Obama’s clean air initiatives? What about foreign manufacturers of land mines if the US ever decides to take part in the treaty banning the use of land mines? How about China’s current case against the European Union on alleged renewable energy subsidies? This is all getting very messy, and is posing an increasing risk to domestic environmental regulations (and the prospects for further tightening of these following the COP21 climate agreements.) This stuff should all be scrapped, and then we can begin again with agreements that have a cretin respect for the rights of countries to try to safeguard their physical environments and the lives of their citizens–which is, after all, what we used to expect governments to do.

One comment on “More trade disasters ahead

  1. Pingback: Mr. Cameron’s Brexit nightmare | Progressive Culture | Scholars & Rogues

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