The Nasty Truth: Free Trade Agreements May Scuttle Green Jobs Plans

If Barack Obama wins the White House, his administration will face potentially irreconcilable conflicts between his signature proposals -- like transforming the American economy into a 21st century "green-collar" job engine -- and the dictates of the "free trade" regime that both major parties have advanced with unbridled zeal for the past quarter century.

It's a story that's gotten little attention during the campaign. The traditional media have found the time to analyze Sarah Palin's wardrobe in great detail, take a hard look at whether or not the fact that Joe Biden was raised in Scranton, Penn., will win over white folks from the "Heartland" and ponder the all-important question of whether a mainstream, centrist Democrat like Barack Obama is in fact a crypto-Maoist. But they haven't bothered to point out that much of what both the Democratic and Republican nominees are promising on the campaign trail would likely be found "illegal" according to the rulings of shadowy trade tribunals that have the power to impose daunting financial penalties against the U.S. government if it were to stray from the economic orthodoxy known as "neoliberalism."

That's what "free trade" deals are about: limiting by treaty the policy space in which lawmakers can operate. As such, both of the presidential candidates are boxed into a cage of their respective parties' creation. It's the dirty secret of the 2008 campaign.

Recently, AlterNet asked Van Jones, founder of Green For All and author of The Green Collar Economy, about this issue, and he responded with defiance. "I want the WTO to tell us we can't do this," he said, "because then we won't have a WTO. I want the free traders to stand up in front of the world and explain to Americans why some people are going to tell you that you can't have clean energy and you can't have your home retrofitted (with American-made products) because it is more efficient for it to be made in Asia or Germany, that you can't bring Detroit back to build wind turbines. I want the free traders to defend having an overseas body to declare this agenda illegal. I want that fight."

It's a fight that might finally help achieve public awareness about what "free trade" really means. When most people hear the word "trade," they picture ships filled with goods crisscrossing the world's oceans. But the reality is that "free trade" is simply a well-tested euphemism for agreements between governments that limit their ability to intervene in the private sector, ostensibly to unleash the awesome "power of the free market."

They don't just cover trade between countries, but also a host of issues that most ordinary people would consider to be purely domestic matters, as long as they have some tenuous connection with international commerce, no matter how far removed.

Activists from across the developing world have been trying for years to call attention to that reality but have largely been ignored by a media and political establishment devoted to promoting the so-called "Washington Consensus."

Now, with Americans hungry for new approaches to the economy, health care, energy policy and a host of other issues, the "free trade" deals advanced by both Democrats and Republicans over the past 30 years may very well come back to haunt them.

According to a report by the watchdog group Public Citizen (PDF), "Many WTO rules have little or nothing to do with international trade," but every WTO country is still "required to 'ensure the conformity of its laws, regulations and administrative procedures'" with the WTO's orthodoxy. Failing to do so is not a meaningless act of diplomatic defiance; the WTO has an enforcement arm. As the report explains:

Domestic policies that extend beyond the WTO constraints are subject to challenge by other WTO signatory countries -- often at the behest of their affected industries -- before WTO tribunals. Of the 137 cases decided to date at the WTO, challenges to domestic laws have been successful nearly 90 percent of the time, with countries moving to alter their laws as ordered except in a single instance, where a country instead chose to pay indefinite trade sanctions to keep its policy in place.
The report also warns that the Corporate Right might use these "incompatibilities" to attack all sorts of progressive legislation, creating what the authors call "a chilling effect."

Nowhere is the conflict between the candidates' rhetoric on the stump and our treaty obligations as clear as with the idea of "green collar jobs" -- perhaps the signature policy initiative of Barack Obama and the modern Democratic Party. The idea is great: Use public funds to invest in new energy technologies and create millions of high-paying jobs here in America -- dignified jobs with decent benefits -- while heading off the looming disaster of catastrophic climate change.

But few of the idea's advocates mention that the bulk of what they envision would likely conflict with our commitments under the international "free trade" regime. This is nothing new; the first dispute ever to be resolved by the WTO was a case brought by Venezuela and Brazil against the United States for provisions in the Clean Air Act of 1990. When parts of the act, which limited the levels of emissions that refined gasoline could produce, were struck down, Mitsuo Matsushita, a member of the WTO tribunal that issued the ruling, noted that by signing the WTO treaty, governments had given "member nations" the authority "to challenge almost any measure to reduce greenhouse gas emissions enacted by any other member."

Consider Obama's plan, "New Energy for America" (PDF). At its heart is a proposal to "invest in a clean energy economy" and "create 5 million new green jobs, good jobs that cannot be outsourced." But most can be. While installing new solar panels would be a job that would stay in the United States, building those solar panels would not be. According to the WTO's Agreement on Subsidies and Countervailing Measures, any financial contribution by a government to the private sector that would give a preference to "domestic over imported goods," either by law "or in fact," is a no-no. Article 5 of that agreement allows a WTO challenge to "any subsidy (tax credit, funding for R&D, and other[s] ...) deemed to ... carry a benefit that has the effect of causing serious prejudice" against goods or services provided by another country. There was an exception for "environmental upgrades," but it expired in 2000.

When it comes to the government, "Buy American" is itself WTO illegal. Obama promises to "help nurture America's success in clean technology manufacturing by establishing a federal investment program to help manufacturing centers modernize" by using federal funds to provide the "critical up-front capital" to modernize "manufacturing facilities to produce new advanced clean technologies." It wouldn't stand a chance if challenged.

Even installing those solar panels is tricky. Under the Agreement on Government Procurement, public funds can only be used to purchase goods and services on the open market (with the exception of weapons and other "defense" spending, and a few other exceptions). This means that while American workers might do the work, there's no way to assure that the profits from that work remain in the U.S. economy. And while Big Oil made sure that energy production wasn't included in the list of services the United States threw open to foreign competition under the General Agreement on Trade in Services, energy transmission was included, limiting the government's ability to set high environmental standards in energy transmission and "related products and services."

Obama promises to "increase fuel economy standards 4 percent per year while protecting the financial future of domestic automakers." This is a nice thought, but it would most likely be subject to challenge: U.S. gas efficiency standards have already been successfully contested once before by the EU in 1994 (under the auspices of the WTO's predecessor, the GATT). The Public Citizen report explains:
The GATT panel found that the U.S. policy, which was facially neutral -- meaning there was one rule for both imports and exports -- had the effect of putting a larger burden on some foreign automakers. The (panel) ruled that the U.S. method of calculating fleetwide efficiency standards advantaged U.S. automakers in practice. ... The case against the U.S. law (was bolstered by) Congressional Record statements concerning the competitive benefits for U.S. autos of the fleetwide calculation, despite the fact that small Japanese cars also benefited from the system.
To address pollution, the Democratic nominee promises to implement an "economy-wide" cap-and-trade program that would use "market mechanisms" to decrease greenhouse gas emissions. He'd auction off emissions permits to polluters and use the money to help pay for the investments in renewable energy that he can't make under the WTO's rules.

But the obvious problem -- one of many potential problems -- is the concept, central to the ideology of "free trade," of "most favored nation" status. In a nutshell, that just means that a member of the WTO, like the United States, has to treat all other members the same. That means that goods imported from countries with weaker emissions standards have to be treated like domestic products. And that, in turn, means that firms -- domestic or foreign -- can simply continue to move their dirty industry abroad, to countries without tight greenhouse gas standards, and import the products back to the United States, keeping our consumer culture's massive carbon footprint intact. Any firm that didn't do so would find itself at a competitive disadvantage in the global marketplace.

Even a policy as simple, and seemingly domestic, as banning the sale of incandescent bulbs and encouraging the use of more efficient alternatives would be subject to challenge under the terms of the Agreement on Technical Barriers to Trade. That limits the government's ability to impose energy efficiency requirements "with a view to or with the effect of creating unnecessary obstacles to international trade (emphasis added)." In other words, if a country that has a thriving incandescent lightbulb industry loses market share, the rules would be on shaky ground.

These are just a few of many examples, all premised on the idea that the economic health of multinationals' bottom lines is far more important than public health, the health of the planet or other vital social goods. And it's not just energy -- these rules impact the candidates' proposals on health care, education, the financial sector and just about everything else (except military spending).

Ultimately, an Obama administration would likely be torn between two ideological camps within the "Big Tent" of the Democratic Party. The candidate's economic advisers include both fiery critics of the "free trade" agenda and some of its most dedicated advocates, mostly veterans of the Clinton administration.

An Obama presidency might therefore represent a kind of final showdown between the progressive and pro-business wings of the Democratic Party. If, as Jones sees it, that comes down to a fight between a now widely discredited ideology called "free trade" and the prospect of a new "green economy" that might help rebuild a tattered middle class while heading off an ecological disaster, then it's a showdown that progressives should be eager to see happen.

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