THE NAFTA CATASTROPHE – 21 YEARS OF NORTH AMERICAN FREE TRADE AGREEMENT
Within a year nearly 3.3 million persons signed the self-organized European Citizens’ Initiative against TTIP and CATA. In Berlin, a quarter of a million took to the streets to fight against the threatened power concentration in corporations and for preservation of democratic structures. Free trade agreements produce a few winners and many losers. After 21 years of NAFTA, a million jobs in the US were cut. Wages have not risen despite growing work productivity and 2 million jobs were lost in Mexican agriculture. In the NAFTA example, the lecturer Conrad Schuhler shows the negative effects of free trade agreements for working persons in industry and agriculture and also for the people of those countries that are not partners to the agreement.
TTIP AND CETA MUST BE PREVENTED
By Conrad Schuhler
[This article published on April 17, 2016 is translated from the German on the Intern, https://isw-muenchen.de
TTIP AND CETA – THE DECISIONS ARE IMMINENT
The meeting of German chancellor Merkel and US president Obama on the occasion of the opening of the Hanover Exhibition Center (April 23) served a single goal: to speed up the TTIP negotiations so the agreement could be signed this year. At the end of February 2016, the 12th round of negotiations on the TTIP between the EU and the UWS took place in Brussels. The controversial themes investment protection and regu9latory cooperation were discussed. The EU Commission was forced by a resolution of the European Parliament to work out a new text for investment protection. In June 2015, the EU Parliament supported the TTIP draft on principle with 436-Yes against 241-No votes but demanded “replacing the ISDS system with a new system.” The question of “regulatory cooperation” involved the so-called “right to regulate,” the right of individual countries to pass political-economic and social regulations and not to be subject to the resolutions of a TTIP council. The EU Commission and the German government immediately expressed their joy over “progress” in these questions. These reservations are without any binding effect apart from the fact that the proposals from the EU side are completely insufficient. The US side rejects them lock, stock and barrel. Now a great theater is staged to immobilize the increasing critical public with lies and tricks in important questions.
In Berlin, 250,000 people took to the streets on 10/10/2015 under the motto “Stop TTIP and CETA! For a Just World Trade!” This gave more headaches to TTIP strategists than all the academic studies and symposiums. The Stop TTIP Initiative in EU countries has 3.4 million signatures. People are in a stormy movement against the planned agreement both in Europe and the US. The TTIP timetable of the Obama government earmarks first passing the TPP, the transpacific Partnership agreement – twelve Pacific countries, from Chile and the US to Vietnam (40% of the world gross national product) and then turn with all its strength to the TTIP project. TPP would be the door-opener for the TTIP.
Whether Obama can finalize the TPP in his term of office is very doubtful, let alone the TTIP. With the help of republican senators, the US president pushed through a so-called “fast track” procedure for TPP. The agreement can now only be negotiated and voted on as a whole. The Congress can not intervene in the negotiations.
However only 13 of 44 Democratic senators approved this procedure. Since then, the mood in the Democratic Party and in the public has developed against the free trade agreements so that Hillary Clinton strictly denies her activity for TPP for years and now appears as an opponent. Her counterpart Bernie Sanders was always against such agreements and emphasizes this as one of his main issues with the applause of a growing following. Democratic politicians disassociate themselves from TPP the closer the election date. This is even more pressing for TTIP since it will be decided in the final stage of the election campaign.
CETA – PRIVATE ARBITRATION COURTS SHOULD BE CODIFIED AND PARLIAMENTS ELIMINATED
If TPP is seen by US globalization strategists as an “instant water heater” for the TTIP, this role is assumed by CETA in Europe. The CETA negotiations ended in August 2015. The legal formalities review was concluded at the end of February 2016. The text of the agreement was then first published. Over 1500 pages, it confirms the worst fears including the reactionary commitments on investor-state lawsuits over investment protection. These procedures are at the center of criticism because private arbitration on business claims for compensation against states would occur with these procedures. This would be the end of all democratic efforts to bring improvements in environmental protection, labor law, working hours, wage levels or product development. Corporations could sue before private arbitration courts whenever such measures negatively impacted the profit interest of companies. Such ISDS procedures (Investor-State-Dispute-Settlement) would make any social and ecological progress so expensive that it would be unaffordable.
Under the pressure of swelling criticism, the German government declared it would support a transparent and public investment tribunal procedure. Nevertheless the old norms of arbitration courts are laid down in Article 29 of the CETA agreement as already applied by the World Trade organization mainly for arbitral awards in favor of litigating companies. The arbitration court should be composed of three “arbitrators” with “special knowledge of international commercial law” and independent of the parties directly involved in the arbitration procedures. In practice, this amounts to appointing co-workers of the big international law offices whoa re closely interlocked with the interests of transnational companies. The ISDS procedures are laid down in the CETA agreement as the only procedure. The World Trade Organization branch ICSID is appointed as the essential venue of disputes. CETA commitments would also prejudge the procedures with the majority of US firms. Four-fifths of all US companies have branch offices in Canada. Through CETA, 41,000 foreign investors could sue EU states for compensation before private ISDS arbitrators.
Another CETA procedure stipulates that first the EU Council and then the EU Parliament rules on the agreement. The German government considers CETA a “mixed agreement,” that is the national parliaments have to ratify it. Like all Berlin statements on the TTIP-CETA, this has a tactical or even misleading character. In the same declaration, Berlin says parts of CETA “for which the EU has exclusive competence” can be applied temporarily. The “temporary application” of CETA rules can be carried out without the approval of the parliaments. The chief Canadian negotiator Steve Verheul said the application could begin as soon as 15 of 28 government s of member EU states approved.
This would also cover ISDS lawsuits. Article 30.8 of the agreement says investment protection lawsuits “could be filed… unless more than three years passed since the date of the agreement.” The agreement would begin with the approval of the majority of the governments of EU states without any hearing of the national parliaments. The commitments would also be binding for three years for all who reject or abandon it. CETA could take effect even if the national parliaments voted against it and remains in effect for years even if the agreement is repealed.
TTIP – BERLIN AND BRUSSELS RELY ON DIVERSION
UNTRUTH NR. 1: A PUBLIC INVESTMENT TRIBUNAL EXISTS
The German economics ministry responsible for the TTIP negotiations now claims “the EU Commission is taking up the proposal of economics minister Gabriel for a moderate and transparent investment protection as part of the discussion. The proposal of the EU Commission is that future investment lawsuits should be decided by an investment tribunal with publically appointed judges.”
The German Judges Union with around 16,000 members with 25,000 judges and public prosecutors across the country, the largest professional association of judges and public prosecutors in Germany, “rejects the introduction of an investment tribunal in the Transatlantic Trade and Investment Partnership (TTIP). The German Judges Union sees neither a legal foundation nor a necessity for such a court (German Judges Union, comment on the investment tribunal for TTIP, comment Nr. 4/16, February 2016). Through such an investment tribunal, the law-making authority of the union and member states would be restricted and the established legal system within the member states and the European Union would be changed…The German Judges’ Union urges German and European legislators to block recourse to arbitration procedures in the realm of international investor protection.”
The German Judges Union says that the latest creation or working model from the House of Gabriel is illegal and that the nonsense of investor lawsuits through private arbitration courts must be ended at last. “Neither the earmarked procedure for nominating judges of the ICS (the investment tribunal planned by the EU Commission) nor its status satisfies the international demands for the independence of courts. On this background, the ICS seems like a permanent arbitration tribunal rather than an international court.”
UNTRUTH NR. 2: THE TRANSPARENCY OF THE PROCEDURE
Transparency is now supposedly established in that delegates of the German Bundestag can look at documents of past TTIP negotiations on computers for two hours on workdays in the reading room of the German economics ministry since the beginning of February 2016. They cannot bring along technical advisors, cameras or their own laptops and cannot speak a word about what they have read. In the visitors’ rules, they are told: “They recognize and accept that a special trust is expected of them when they are granted access to TTIP texts.”
This is a special piece of insolence of the state toward the people’s representatives. They are “granted” their access and expected to show a “special trust.” These persons who have to decide “in the name of the people” about the agreement cannot reveal their contents to “the people.” The TTIP negotiations are a lesson about “post-democracy,” about a political system whose façade of citizens” sharing and participating has caved in.
22 YEARS OF NAFTA – THE EXPERIENCES ARE DEVASTATING
The propaganda of TTIP instigators promises only positive things: jobs and prosperity will increase. The productivity and competitiveness of participating economies will improve. The same promises were made to the nations involved in NAFTA (North American Free Trade Agreement, the free trade consortium of the US< Canada and Mexico). A balance-sheet of the 22 years of NAFTA proves the exact opposite.
NAFTA took effect on 1/1/1994. In the US, the agreement passed with the argument that it would create jobs. At the end of 1993, US president Clinton claimed “the largest free trade zone of the world will arise and 200,000 jobs will be created in the US by 1995.” Mexicans were fooled into thinking their developing country would become an industrial country and Canadian were told their country would increase its productivity (cf. Barbara Eisenmann, “Das Netz des Geld”).
However the situation for the non-rich part of the populations has worsened in all three countries. For the US, Jeff Faux of the Economic Policy Institute summarized: “Clinton and his co-workers promised the agreement would bring well-paid jobs in the US, an increasing trade surplus with Mexico and a dramatic reduction of illegal immigration. Instead NAFTA cost the US a net loss of 700,000 jobs. The trade surplus with Mexico turned into a chronic deficit. The economic uprooting in Mexico made the stream of illegal immigrants in the US swell.”
In Mexico, the three million small corn producers were exposed to the dumping pressure of subsidized big US producers. Altogether at least two million jobs were lost in Mexican agriculture. The US raised its agricultural exports to Mexico five-fold in the NAFTA time. Mexico’s promised industrialization and higher work productivity in Canada did not happen. Canada be came an exporter of raw materials, above all crude oil from tar sands promotion (Eisenmann, op.cit.).
NAFTA was profitable for big business interests. With it, ISDS was the crucial principle of free trade. The International Center for Settlement of Investment Disputes of the World Bank and the UN Commission for International Trade Law were chosen as arbitration courts, traces which CETA and TTIP now follow.
The president of the AFL-CIO union, Richard Trumka, summed up the experiences with NAFTA: “Wages have stagnated in all three countries and families strain to cover their costs for health insurance, education, housing and pension schemes… The free trade agreements forced down wages and suppressed rights to jobs. They have made the middle class shrivel in the US, Mexico and Canada.”
TTIP AGAINST DEVELOPING AND THRESHOLD COUNTRIES
While corporations in western metropolises – led by the US and Great Britain – will be the great winners of TTIP, the countries of the South, the developing- and threshold countries, will be income losers. TTIP will increase the economic inequality in the world. A study commissioned by the Bertelsmann foundation confirmed this over two years ago.
A new study mandated by the German economics ministry corroborates this fatal effect of TTIP. All regions outside the TTIP zone will have annual (real) per capita income losses up to 2.13% (ifo Institute).
VATTENFALL’S LAWSUIT AGAINST GERMANY IS SCANDALOUS
By Jonas Sjostedt
[This article published on November 27, 2014 is translated from the German on the Internet, www.nachdenkseiten.de/?p=24100. Vattenfall, a Swedish energy conglomerate, is suing Germany for 4.7 billion euros for closing two nuclear power plants. Under TTIP, TPP and TiSA, corporations can sue states for lost profits. The German Judges Union calls additional protection of foreign investors “nonsense” that undermines democracy and the constitutional state and could lead to an avalanche of lawsuits and the chilling of labor and environmental protection. Jonas Sjostedt is the chairperson of the Swedish Left Party.]
We own Vattenfall in common. This leading energy company should be transitioning to an ecologically sustainable energy supply, regardless where the business is active – but isn’t today. Vattenfall’s lawsuit against Germany on account of its resolution to end nuclear power is scandalous. The government should prevent this and ensure that the possibility of corporations suing states does not spread, wrote Jonas Sjostedt (Left Party).
FOCUS: LAWSUITS AGAINST STATES
Germany resolved to end nuclear power and rely on renewable energy. This change is already underway. The disaster in Fukushima has great significance and shows the enormous risks of nuclear energy. The Swedish government also has the goal of gradually ending nuclear power as a power source. These are democratic resolutions that the elected people’s representatives in our countries have the right to enact. Even those with different views on this factual issue accept this principle.
But the German resolution on phasing out nuclear power is contested by businesses that make profits like Vattenfall that belong to the Swedish state. Vattenfall now demands compensation from Germany of 4.7 billion euros, equivalent to 43 billion Swedish crowns. This is a completely perverse demand. The Swedish government should force Vattenfall to retract its compensation claim, the Left Party is convinced. The German resolution to stop nuclear power must be respected. Both German and Swedish energy policy should be decided democratically, not by extortion and threats of businesses.
Vattenfall has made bad investments in fossil gas and coal and not only in nuclear power. This strains the environment and Swedish taxpayers including businesses. Vattenfall’s production causes more greenhouse gas emissions than the whole nation of Sweden. This impairs Sweden’s credibility in international climate work.
Vattenfall’s promotion of brown coal in Germany triggers strong and justified protests from the local population. This is also true for the way Vattenfall operates the power supply network in cities like Hamburg and Berlin. Whether the networks should be returned to public ownership is debated there.
Vattenfall must be reoriented. No new investments should be made in fossil energy (coal pits or nuclear power plants). A more reasonable plan must be drawn up for apportioning fossil fuel. Vattenfall should be in a position to change to renewable and sustainable energy systems. Vattenfall’s business leaders must be replaced so this can happen in a trustworthy way.
Vattenfall’s lawsuit against Germany is not an isolated case. Philip Morris took legal action in Australia when the regulations for cigarette packages were changed. This regulatory change occurred for reasons of public health but threatened the future profits of Philip Morris. A Dutch insurance company sued Slovakia and won when the country sought to introduce new rules on insurance company profits.
The next time we in Sweden could be sued because of democratic resolutions that were passed. The EU is now negotiating two free trade agreements with Canada and the US. In these agreements, businesses have the right to sue states when democratic laws reduce future business profits. In the agreements, this undermining of democracy is called “investment protection.”
The lawsuit possibility against states already existed in some free trade agreements but the use of this possibility has dramatically skyrocketed. The number of cases where businesses sue states in appealing to investment protection has soared almost fivefold since the turn of the millennium according to the UN organ UNDAC that monitors development. The agreement gives businesses the chance for enormous compensation and becomes a weapon for extorting states to avoid certain legislation. Besides these big businesses, lawyers and law offices are the mammoth winners in the resulting long and expensive lawsuits. The environment, public health and the right of citizens to democratically determine justice and the law are the losers.
Vattenfall’s demand for compensation shows that international agreements giving businesses the right to upend democratic laws is scandalous. The government must stop Vattenfall’s lawsuit against Germany and resist any expansion of the lawsuit possibilities against states. Democracy must be in first place.