Will Dems Follow Through on Promises to Fix NAFTA?

Kudos are in order for the intrepid activists in Iowa and New Hampshire whose bird-dogging helped shift the presidential debate on free trade. Just one sign is that all three top Democratic contenders told the Iowa Fair Trade Coalition they would fix problems with the North American Free Trade Agreement.

Even Hillary Clinton, whose husband rammed NAFTA through Congress 14 years ago, has vowed to "correct its shortcomings."

Since NAFTA has been the model for U.S. trade policies, reopening this pact could theoretically pave the way for a whole new approach that puts workers, the environment and communities above narrow corporate interests.

The key question, of course, is how far would the Democrats be willing to go?

For years now, economic justice activists have had to look to the Global South for bold political leadership on globalization. Brazilian President Luiz Inácio Lula da Silva played the key role in deep-sixing a plan to expand NAFTA to the whole hemisphere. In 2005, he also teamed up with other developing country leaders to block corporate-driven efforts to expand the World Trade Organization's powers.

Recently, seven South American governments launched a Bank of the South to liberate countries from the World Bank and International Monetary Fund's onerous loan conditions. Venezuela has been a leader in promoting regional integration based on resource-sharing rather than cut-throat competition.

In one area that deserves more attention, Bolivian President Evo Morales has stuck his neck out furthest. This is the issue of the wildly excessive investor protections that are in NAFTA, as well as most other U.S. trade agreements and myriad bilateral investment treaties.

These anti-democratic rules give corporations the power to bypass domestic courts and sue governments in unaccountable international tribunals. Most controversial is their power to demand compensation for any government actions, including public interest regulations, which diminish their profits. For example, a Canadian company is currently using NAFTA to sue the United States over California laws aimed at reducing the environmental damage of gold mining projects.

Several years back, Bechtel Corp. used similar rules in an investment treaty to sue Bolivia over a water privatization fiasco. The company had come in to the city of Cochabamba and almost immediately jacked up water rates to sky-high levels. When local residents responded with massive protests, Bechtel abandoned the project, only to turn around and sue for some $50 million. An international activist campaign pushed Bechtel to settle for a token sum shortly before Morales took office, but by that time the cash-strapped Bolivian government had spent more than $1 million in legal fees.

These days that case looks like small potatoes compared to some other countries' legal nightmares. Argentina has been hit with more than 30 investor claims totaling billions of dollars, most of them over actions to lessen the pain of the country's 2000 financial crisis. Ecuador is facing a $1 billion suit from just one company -- Occidental Petroleum.

These and other governments are beginning to speak out, but it is Bolivia that has been most bold in challenging the insanity of the investor-state dispute system.

In May 2007, the Morales government became the first in the world to withdraw from the International Center for the Settlement of Investment Disputes (ICSID), a court associated with the World Bank that adjudicates investor-state cases. That court, however, is ignoring the Bolivian government's actions and allowing a European telecommunications company to go ahead and sue it.

This week, more than 800 civil society organizations from 59 countries sent a petition (PDF) to the World Bank president calling for that case to be thrown out. They also recommended that the World Bank create an independent panel to review the impact of the investor-state dispute system on human rights, democracy and global poverty.