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Watching the FTAA: An Interview with William Greider

An arcane provision of NAFTA -- that could set a precedent for the forthcoming free trade zone for all of the Americas -- allows corporations to sue governments if new laws threaten future earnings.
 
 
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In the October 15 edition of The Nation magazine, William Greider reports on an arcane provision of NAFTA that allows international corporations to sue governments if new laws threaten future corporate earnings. The provision, according to Greider, sets a very troubling precedent as the Bush administration seeks Congressional authority to negotiate a free trade zone for all of the Americas.

Steven Rosenfeld: What you describe in great detail in your article in The Nation is a new legal power given to international corporations, where these companies can sue national governments for vast sums if new laws, such as state or national environmental or public health regulations, somehow limit their future profits. It's called "Chapter 11" -- not the bankruptcy provision -- and started in NAFTA, the North American Free Trade Agreement. Is that right?

William Greider: That's right, and it's now on the table again, being pushed by multinationals and right-wing groups, to be included in the free trade areas for the Americas, which is the new round of negotiations the Bush administration wants to start for all of North and South America. So it's an imminent problem for Americans.

SR: Haven't we already seem some legal action under NAFTA's Chapter 11?

WG: Yeah, and this is one of those things that fogged through the debate about NAFTA eight or 10 years ago, with very little attention, virtually no debate in Congress. [It was] ostensibly to give American investors some insurance against the possibility that Mexico might nationalize their factories and property, or that they would use regulatory edicts to slyly expropriate by creeping regulation.

Now, in practice, this private, legal right for investors is being used against the United States and Canada, nearly as much as it's being used against Mexico. And we've had huge claims filed. One is pending against a California law banning a gasoline additive that wrecks water. It makes water undrinkable. In normal circumstances, no American citizen or American business would have the same power to challenge the propriety of this law that this Canadian company, called Methanex [Corp.], has under NAFTA. It is actually a very, very fundamental fight and I hope people will awaken to it, because the stakes are huge.

SR: You write that this provision was created by pro-business, pro-free trade lawyers who wanted to redefine and expand what's known in legal circles as "takings," or government seizure or private property. But in this case, these lawyer-lobbyists were successful in writing into international trade law, a power that not even the conservative U.S. Supreme Court would approve. So, how were they able to do that?

WG: Well, mostly by not attracting too much public attention, is the short answer. When NAFTA was passed, these Washington law firms had nurtured this idea for some years, and had really put it into form. And some of them, working inside the government, at the U.S. Trade Representative's Office at the State Department and the Treasury Department, crafted it in the negotiations with Mexico and Canada. It then gets sold to Congress on the basis of, "Oh well, don't worry about this. It's just a little protection against Mexico that we are writing in for our investors." And I think it is fair to say that they slipped this one by all of us, certainly, including me. That even people who were fairly diligent in covering the NAFTA debate, did not see the implications of this until it began exploding in these big-dollar, billion-dollar claims, filed by companies against governments.

SR: How many of those claims have we seen?

WG: Well, it's impossible to give a precise number, because, believe it or not, they're not even required to disclose the cases to the public when they are filed. Now most if them we find out eventually. Some people count 16. I counted, what I thought were 18, and there may be more. Some of them are trivial, and others are quite controversial. I describe them as a ticking time bomb for the politics of globalization. Because if any of these companies -- a couple of them have already won -- but if any of them win the really big controversial cases, I think the effect will be to shock the American public for starters. "How did this happen?" "Where did this come from?"

And the implications of it, of course, are quite stark. If a company can collect damages for some kind of partial injury from some new regulation, then it's going to be a real noose around government's ability to regulate anything. Because, essentially, the idea is, "Okay, the government can regulate clean air, clean water, safe factory conditions or so forth, but it's going to have to pay us to do that." And the mere threat of losing huge, multi-million dollar lawsuits, will naturally intimidate the people in government, including political leaders, from acting on public interest issues.

SR: You also write that the threat now extends beyond NAFTA because the Bush administration is seeking new authority from Congress to negotiate an all-Americas, a hemispheric if you will, free trade zone. And that a Chapter 11-like provision, is all-but likely to pass before Congress, unscrutinized, in the fine-print if you will, because Congress is looking at stimulating the economy and providing for national defense.

WG: Well that's the hope of right-wing advocates. That they can sort of fog this issue past the Congress once again, under a banner of patriotic unity. There is an opposition in both House and Senate, which is at least demanding some answers to these questions and threatening to block it. At this hour, we don't know whether that opposition is strong enough to really force the debate into daylight and get the public's attention.

It takes people a while to really grasp the potential, but I can tell you that not just environmentalists, but a lot of legal scholars -- who have really dug into the possibilities are quite alarmed -- including officials who were enforcement officers in the government, at least in the Clinton administration. They made a very strong, albeit private argument within government, that if these terms, that were first planted in NAFTA, are repeated in other trade agreements, they are ultimately going to spill over into domestic legal doctrine. And that's because this sets up exclusive rights for foreign investors, who plant capital and built factory production and so forth, in a foreign country. [These are] rights that domestic businesses, not to mention domestic citizens, do not have.

So you see, it's begging a deep conflict over "How come they can make this lawsuit and I can't?" And that's going to be a pretty legitimate complaint from local businesses and others. And that in turn will put pressure on the federal judiciary and others to shrug and go along with it. At the end of the day, if that happens, we will have had a profound transformation in American governance and public rights. It's not a simple subject to digest, I grant, but people need to go to work on it right now, because the train is moving.

William Greider is a national affairs correspondent for The Nation magazine, and author of One World, Ready or Not: The Manic Logic of Global Capitalism.