CAFTA Trade Lawsuit Highlights Threat To State Regulations From Bad Trade Agreements
We've detailed in the past the way new international trade deals empower corporations to undermine local regulations. A recent case highlights just how byzantine and dangerous the process is getting: a Canadian mining company is using a recently established Nevada subsidiary to use the federal Central America Free Trade Agreement (CAFTA) to try and overturn mining regulations in El Salvador.
Georgia's Draconian Voter Verification System Passes Federal Muster
Two years of courtroom battles ended on Monday as Georgia received a green light from the US Department of Justice (DOJ) to go ahead with its controversial voter verification system, a major step backward for the state.
Corporate "Investor Rights" Expanding: The case will be a high-profile test of so-called "investor state enforcement" (ISE) provisions which have become a common feature in trade agreements since NAFTA. These same investor rules are a central feature of three pending trade agreements (with Korea, Colombia, and Panama), which the Obama administration plans to finalize in coming months.
First invented as part of NAFTA, ISE rules grant companies which operate in one of the states that are party to the trade pact the right to sue another party country's government if that country's federal or state laws and regulations impinge upon the company's investments there. Such cases are heard by private arbitration tribunals outside of the defendant country's legal system. These extraordinary private-investor rules grant foreign companies greater rights than domestic companies, which may not have legal basis for challenging commonly accepted public interest laws. Between 1994 and 2009, sixty-four cases were brought against countries under NAFTA, costing governments untold millions of dollars in legal expenses and amounting to billions of dollars in potential judgments. In total, governments have been found liable for over $200 million in judgments under NAFTA.
By far, the more significant implications of ISE rules are the threats they pose to the environment, workers, public health, and other public interest constituencies. In addition to the expansive opportunities they afford to multinational corporations to undermine public interest laws, they can drain government resources and create a chilled policy environment in which elected officials and public agencies feel constrained by the threat of investor-state actions. The El Salvador case is exemplary of the danger states face from the investor-state rules included in the proposed Korea-U.S. Free Trade Agreement (Korea FTA), in particular.
The El Salvador Case and the Threat to Local Regulation: The Canadian mining company, Pacific Rim Mining Corporation, is challenging a progressive mine-licensing law passed in 1996 with a two-step licensing process. First, a company must obtain a permit for exploratory mining, which Pacific Rim did in 2002. Before it can initiate commercial mining, the company must next obtain a full-scale exploitation permit, which requires approval of both an Environmental Impact Assessment (EIA) and a financial and technical feasibility study in order to protect El Salvador's scarce potable water resources. Pacific Rim has not submitted such an application.
Pacific Rim's plans included using two tons of cyanide per day to process the ore, at a site located on El Salvador's largest river and source of drinking water. Due to the dangers posed by such mining practices, a national movement formed against precious metal extraction, and in March 2008, the conservative government led by President Elias Antonio Saca announced that no more permits would be issued until a new, thorough environmental study was completed and a mining reform law was passed.
Faced with this changing political environment, Pacific Rim decided to exploit CAFTA's investor-state rules. At the time, however, the company had no U.S.-based operations and therefore no standing under CAFTA to sue El Salvador. So in December 2007, it reincorporated a Cayman Islands subsidiary in the state of Nevada, and in April 2008, following President Saca's announcement, sent a letter to the Salvadoran government threatening to file suit. In December, Pacific Rim filed suit, claiming hundreds of millions of dollars in damages.
The El Salvador government filed for dismissal, but on August 2, 2010, the arbitration panel rejected the government's position and ruled that the case will move forward. The government has since filed a second set of objections challenging Pacific Rim's "nationality change" as an abuse of the treaty and claiming that Pacific Rim's Nevada subsidiary is not the proper interested party, but rather the Canadian parent corporation, which has no significant investment interests in the U.S.
The case could determine how broadly ISE provisions will be extended in practice, and it illustrates the dangers to states' sovereignty posed by future trade deals. If a multinational corporation can relocate a subsidiary to the US to undermine another FTA country's laws, then the same could be done to undermine progressive US state laws, such as California's new vehicle efficiency standards, that have been upheld as constitutional. The Obama administration plans to move first on the Korea FTA, which poses the greatest risk of investor-state suits of any agreement since NAFTA. Korea-based corporations have hundreds of operations located in the US, and as it is written, the Korea FTA would even enable companies to skirt new US financial reforms.
Two years of courtroom battles ended on Monday as Georgia received a green light from the US Department of Justice (DOJ) to go ahead with its controversial voter verification system, a major step backward for the state. "It came as something of a shock," said Laughlin McDonald, the voting rights project director for the American Civil Liberties Union, which joined a lawsuit against the voter ID system.
DOJ itself has blocked the program in the past, calling it "a flawed system" that subjects a disproportionate number of minority voters to "additional and, more importantly, erroneous burdens on the right to register to vote." However, DOJ backpedaled once Georgia revised the system last week to only include first-time voter registration applicants; initially, first time voters as well as voters making technical changes to their driver's licenses were affected by the program.
A Burdensome ID System: Georgia's voter verification system checks voter registration information against drivers' license and Social Security databases - databases that are, according to voting rights groups, error-ridden. Voter registration procedures further require birth certificates and other documents as proof of citizenship, which many people, especially students, minorities, and the elderly, cannot readily access.
The flawed procedures were brought to light before the 2008 presidential election, when thousands of US citizens were erroneously flagged as non-citizens. After a coalition of voting rights groups sued the state on behalf of Jose Morales, a naturalized Latino citizen incorrectly purged from the voter rolls, the voter verification system was blocked until a Section 5 review could be completed. Under Section 5 of the Voting Rights Act of 1965, Georgia and other states with a history of discrimination are required to submit any changes in voting procedures to the DOJ or the US District Court in Washington DC for pre-clearance prior to implementation.
Fear of a Rightwing Supreme Court: The scope of Georgia's now approved system is actually much broader than a proposed version that was rejected by DOJ in 2009, which would have only applied voter verification to first-time applicants who registered by mail and did not provide proper identification. Though DOJ has not issued a formal statement explaining its actions, Laughlin McDonald of the ACLU speculated that DOJ pre-cleared the program because Georgia's lawsuit specified that if the court found its system constitutional under the Voting Rights Act, then it should also rule all of Section 5 unconstitutional - people "were concerned what this [Supreme Court] would do if it was given an opportunity to rehear a case like this."
Intuit, a private firm that manufactures TurboTax, has pushed California lawmakers to eliminate the popular, successful, and cost-effective public tax filing services, ReadyReturn and CalFile. These two programs offer millions of low- and middle-income Californians a free and reliable method to calculate and file taxes. They are also wildly popular - ReadyReturns's user satisfaction rate reaches above 98 percent. The state's Franchise Tax Board estimates that in total, ReadyReturn and CalFile save taxpayers between $4 million and $10 million in filing fees and reduces the state's processing and administrative costs by $500,000 a year. Considering the depth of the state's fiscal and economic woes, these savings are sorely needed.
Intuit has spent over $1.25 million in the past five years on lobbying efforts to kill the programs and provided right-wing politicians with over $2 million in campaign support. Their efforts have had a visible impact: conservative state lawmakers have withheld support for domestic violence shelter and police department funding in an attempt to force the elimination of the programs.
In their crusade against government and public structures, the anti-tax movement is joining the opposition to these types of tax preparation programs because a dependable, popular, and cost-effective government service does not suit their hackneyed and hollow messaging.
As Professor Dennis J. Ventry Jr. of the UC Davis School of Law notes, "[a]bolishing ReadyReturn and CalFile would hurt Californians. Intuit's alternative would cover fewer taxpayers and provide fewer services; it would cost individuals millions of dollars in preparation fees (much of which Intuit wants to pocket); and it would kill two programs that actually save the state money. It doesn't add up for anyone. Except Intuit." Accordingly, this effort to eliminate a successful government program that saves money and assists millions of taxpayers follows the pattern of right-wing behavior at both the state and federal level -- placing the interests of large corporations and the very wealthy over middle class families and effective economic and fiscal policy.
Export Nation: How U.S. Metros Lead National Export Growth and Boost Competitiveness - This Brookings Institution analysis of US exports of goods and services produced in America’s 100 largest metropolitan areas shows how exports will help secure our economic future. The report also includes the export profiles for each of the 100 largest metro areas, including the impact of exports on the economic environment of each large metro area (growth rates, most significant export markets, jobs supported, wages earned, and particular industry clusters for each metro), and the contribution of each metro to the total US export mix.
Who Are America’s Children? Examining Food Insecurity Among Children in the United States - According to a new report from the National Center for Children in Poverty, while 14 million children live in families with income below the federal poverty level, families with income twice the poverty threshold experience similar hardships such as food insecurity. The report recommends strengthening and improving federal nutrition programs such as SNAP - the Supplemental Nutrition Assistance Program, formerly called the Food Stamp Program - to help families overcome food insecurity.
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