Will Dems Follow Through on Promises to Fix NAFTA?

By Sarah Anderson, AlterNet. Posted January 16, 2008.

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.

In the United States, local legislators, as well as environmental, labor, and other activists, have attacked these investor protections for years. Even Nobel economist Joseph Stiglitz, who promoted NAFTA while working in the Clinton White House, is now critical. Last year he admitted that "It was only after it passed that the potential consequences of [the investment provisions] became clear."

But is the clamor loud enough to penetrate the din of the presidential race?

Judging from their responses to the Iowa Fair Trade Coalition survey, Barack Obama (or an astute staffer) appears to have the clearest position on this issue. While he did not agree to the activists' demand to eliminate private foreign investors' right to sue governments, he did promise to ensure that this right was "strictly limited" and to "fully exempt any law or regulation written to protect public safety or promote the public interest."

John Edwards, who deserves major credit for calling for NAFTA renegotiation during the last presidential race, was less specific than Obama on investment, sticking to his central issues of ensuring that trade pacts don't undermine labor and environmental standards.

Clinton did not comment on the investment issue in her response to the Iowa group. She has, however, vowed to at least take a "pause" before negotiating any new NAFTA-style trade deals.

Latin America's leading free trade opponents should not hold their breath over the prospect of a bold new ally in the White House. The long slog to overhaul our trade and investment policies didn't end in Iowa or New Hampshire and it won't end on Nov. 4 -- no matter who wins. In fact, the most positive likely outcome may be that the United States takes to the sidelines of the globalization debate. And yet even this would be welcome, after so many years of attempting to carry the ball in the wrong direction.

See more stories tagged with: trade, nafta, investor rules

Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies in Washington, D.C., and is a co-author of the report Challenging Corporate Investor Rule (PDF).

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