A Trade Clause That Suppresses the Common Good

It's called Chapter Eleven and it has little to do with bankruptcy.  Instead, it's a little known clause that has big time implications for local, state and federal governments looking to promote regulations that affect the common good.

While several attempts to hijack its meaning have appeared recentlyover the years, the common good has to one extent or the other, always been attributed to  the idea of citizens contributing to something bigger than themselves and from which everyone benefits.

It's the philosophy that shaped America's ascent from the Great Depression, our victory against facism soon after and formed the underpinnings of the Great Society.  Even Bill Clinton's campaign in 1992 relied heavily on it with its references to universal health care and devotion to building an economic surplus.  

On the other side we have a neo-liberal view of the world that has created a system of targeted sacrifice in the United States and Canada combined with the exploitation of workers in developing countries for the good of only a few.  

Back in the early 1990s, we were promised by NAFTA promoters, including many of the world’s largest corporations, that "free trade" deals would usher in a new era of economic enlightenment.

They would create hundreds of thousands of new high-wage U.S. jobs while raising living standards in the U.S., Mexico and Canada. Environmental conditions in Mexico would soar, Democracy would run rampant and Mexico would be transformed from a poor developing country into a booming new magnet for U.S. exports.

The headlines from every corner of the mainstream media echoed these setiments.  The New York Times (7/21/92) said NAFTA promised "jobs, wealth and economic activity throughout the continent." The Washington Post declared (9/14/93) that "the list of new opportunities and advantages is a long one," while insisting (5/11/93) that "opposition to the agreement is rooted in dark forebodings almost comically out of proportion to any possible results." The Wall Street Journal (8/7/92) predicted "lower prices on a wide variety of goods," which Time (8/10/92) pointed out would especially help "low-income households."

So what happened?

Many people are awakening to the effect these so-called "free trade" deals have had on our nation and on our trading partners.  I say "free trade" because these are anything but "free trade" deals.  A free trade deal would in effect be one that is reached for the benefit of multiple nations, these deals do little to address national boundries and instead focus on the rights of multinations operating within each.

For example, did you know that Chapter 11 of the NAFTA deal allows private enterprises the right to nullify all domestic court and regulatory decisions in each of the three NAFTA countries?  

Did you also know that a foreign company can file suit for monetary damages that hurt their bottom line due to any local, state, provinvial or federal regulation passed by a governing body?

NAFTA and CAFTA contain a variety of new rights and protections for investors and investments in participating countries. If a company believes that a NAFTA government has violated these new investor rights and protections, it can initiate an arbitration process for monetary damages before a trade tribunal.

Imagine, let's day, Mexico passes an environmental law that forbids dumping of hazardous waste near in the Maquiladora region.  Under NAFTA, an American based company can sue the Mexican government or local government, for the loss in profit the regulation caused.

What kind of chilling effect will that have on local and state regulators in each particpating NAFTA country?  Or in a CAFTA country for that matter, which also contains the same language?  

While some may say no foreign investor would dare do this, it has already happened.

S.D. Meyers, an Ohio waste treatment company, challenged Canadian regulations that banned PCB exports.  The company saw its market share in the industry hurt due this ban and was awarded $4.8 million in damages for its loss in market share.

Metalclad, a firm based in Delaware, filed suit against a mexican municipality over the municipality's refusal to permit the construction of a toxic waste dump.  The NAFTA tribunal found that the denial of the construction permit and creation of an ecological preserve in the area was a violation of Chapter 11 of NAFTA.  The company was awarded $15.8 million.

There is a prevailing mentality today amongst the economic elites here and around the world that idolizes the free market myth with an eyes towards knowing the rules that apply to everyone else can be changed to suit them simply because they can.

This mentality is the reason why international agreements such as NAFTA, CAFTA, and the FTAA are anything but "free trade" agreements.  To believe these agreements have anything to do with "free trade" is equivilant to believing "Right to Work" laws are pro-worker, the "Clear Skies" Initiative actually protects the environment and the "Patriot Act" actually protects the Constitution.

Of course, proponents of these trade deals will tell you that the cost savings from cheap labor actually lower prices  for American consumers.

But is that really the case?

Between 1993 and 1995, NAFTA-induced U.S.-Mexico trade caused prices paid to Florida tomato farmers to drop 22 percent. Meanwhile, the retail price on tomatoes rose 3 percent. The difference amounts to a 25 percent profit reaped by transnational corporations, rather than being passed on to the consumer

The next time you go to purchase a new pair of $100 sneakers, think of this fact.  When those shoes were made in the United States they cost $100 while workers were making between $15 to $20 an hour to produce them.  Those same sneakers cost 25 cents an hour to produce now in labor costs, but they still cost $100.

The lack of savings from lower labor costs does not just pertain to the manufacturing industry.  Even the price of tomatoes, which was supposed to be lowered, never came down.

Between 1993 and 1995, NAFTA-induced U.S.-Mexico trade caused prices paid to Florida tomato farmers to drop 22 percent. Meanwhile, the retail price on tomatoes rose 3 percent. The difference amounts to a 25 percent profit reaped by transnational corporations, rather than being passed on to the consumer.
MacNeil Lehrer News Hour

While the evidence of the failure of "free trade" continues to pile up with the loss of .

it pushes nations back toward a 19th century ideology in which government’s economic function is to protect the interests of investors, while working people—the overwhelming majority in each nation—are left to fend for themselves.

at least 1,015,291 U.S. jobs from NAFTA alone  The washington Alliance of technology Workers says that at 69,000 high tech jobs have been lost in the past year alone.  Another 43,000 jobs from Hewlett-Packard alone are expected to be shipped out to China and India by the end of 2007.

What this job loss and environmental degredation means for the United States is we are quickly losing our capacity to produce goods and inteleectual property that will cripple our nation.  What this forebears for the rest of the world needs some examining too because those jobs paying 25 cents an hour are now causing worker strikesacross China on a scale that was not expected 5 to 10 years ago.  But the companies these workers, along with technology workers employed in Bangalore, India are employed by happen to be Amnerican-owned.  And what better way to alientate the entire world (besides George Bush) than be the source of all their labor strife.