Obama-Backed Trans-Pacific Partnership Expands Corporate Lawsuits Against Nations for Lost Profits

We discuss the TPP with two guests: Celeste Drake, a trade policy specialist with the AFL–CIO, and Jim Shultz, executive director of the Democracy Center, which has just released a new report on how corporations use trade rules to seize resources and undermine democracy. “What is the biggest threat to the ability of corporations to go into a country and suck out the natural resources without any regard for the environment or labor standards? The threat is democracy,” Shultz says.

“The threat is that citizens will be annoying and get in the way and demand that their governments take action. So what corporations need is to become more powerful than sovereign states. And the way they become more powerful is by tangling sovereign states in a web of these trade agreements.”

JUAN GONZÁLEZ: We turn now from domestic surveillance to secret trade deals. The Obama administration is facing increasing scrutiny for the extreme secrecy surrounding negotiations around a sweeping new trade deal that could rewrite the nation’s laws on everything from healthcare and Internet freedom to food safety and the financial markets. The latest negotiations over the Trans-Pacific Partnership, or TPP, were recently held behind closed doors in Lima, Peru, but the Obama administration has rejected calls to release the current text. Even members of Congress have complained about being shut out of the negotiation process.

Last year, a leaked chapter from the draft agreement outlined how the TPP would allow foreign corporations operating in the United States to appeal key regulations to an international tribunal. The body would have the power to override U.S. law and issue penalties for failure to comply with its rulings. Earlier leaks from the draft agreement exposed how it included rules that could increase the cost of medication and make participating countries adopt restrictive copyright measures.

AMY GOODMAN: To talk more about the TPP, we’re joined by two guests. Here in New York, Jim Shultz is with us, executive director of the Democracy Center. The organization just released a report called “Unfair, Unsustainable, and Under the Radar: How Corporations Use Global Investment Rules to Undermine a Sustainable Future.” In Washington, we’re joined by Celeste Drake. She’s trade policy specialist with the AFL–CIO, the American Federation of Labor and Congress of Industrial Organizations, testifying today at the Senate Foreign Relations Committee hearing on labor issues in Bangladesh.

Jim, let’s begin with you. You’re just about to head off to the United Nations. You’re usually in Bolivia.

JIM SHULTZ: Yeah.

AMY GOODMAN: Talk about—I mean, most people have not even heard of what—what does TPP mean?

JIM SHULTZ: Right. Well, it’s the Trans-Pacific Partnership. And this is part of this global web of trade agreements that are being negotiated, that have been negotiated over the last 30 years, that, you know, from the outsider, it could seem like it’s a bunch of legal mumbo jumbo, but really what’s at stake is democracy. The report that we just put out looked at a very troubling part of what these agreements involve, which are these special trade tribunals that are used by corporations to directly undermine the ability of citizen movements to influence their government.

You know, the famous case, of course, is the one from Bolivia, where Bechtel from San Francisco came in, privatized—took over the privatized water system, raised people’s rates up by more than 50 percent, was kicked out by a popular rebellion, and turned around on a $1 million investment and sued Bolivia for $50 million. These cases—there’s almost 500 a year now of these cases being filed all over the world. Philip Morris, the tobacco giant, is suing Uruguay for the sin of putting health warnings on their cigarettes. In El Salvador—

AMY GOODMAN: What do you mean?

JIM SHULTZ: So, Uruguay decided to put stiffer health warnings on cigarette packages. And Philip Morris doesn’t like that, so Philip Morris uses a bilateral investment treaty between Uruguay and Switzerland—so, Philip Morris somehow puts on a Swiss hat and pretends it’s a Swiss company—and is suing Uruguay for hundreds of millions of dollars. This is—this is everywhere.

I mean, one of the most egregious of the current cases is in El Salvador, where here’s the community of Las Cabañas that discovers that this Canadian mining firm is going to dump poisonous chemicals into their drinking water to suck gold out of the ground. And they do what citizens are supposed to do: They hammer on their government until they get the government to agree not to let the mining go forward. So what does the company do? The company turns around, under one of these trade agreements, and sues for $315 million. So what you have—it’s a win-win for the companies, because they either win huge amounts of money—I mean, this is 1 percent of GDP in El Salvador, the amounts of money are enormous—or, just as important, they have a chilling effect on the ability and the willingness of governments to protect their people.

JUAN GONZÁLEZ: And you’re saying there are as many as 500 lawsuits a year related to these kinds of trade infringements?

JIM SHULTZ: Yeah, it’s grown like this. And it’s a new—it’s a new derivatives market. These companies that are bringing these cases will actually go to investors and say, “We will sell you, for a price, 30 percent of the cut if we win the case.” I mean, it’s a marketplace. But the bottom line is, what it means is, if you are looking for the protection of your environment, watch out to be sued. And this is not just poor countries. Germany is getting sued, because after Fukushima, the citizen movements there were able to win a moratorium on nuclear power. And so, the Swedish company involved in their nuclear power industry is suing them for 700 million euro. And the TPP is just going to bring more of this.

JUAN GONZÁLEZ: But the other side of this—

JIM SHULTZ: Yeah.

JUAN GONZÁLEZ: —is that obviously these corporations are reacting to an upsurge of citizen movements insisting on protecting their environments and protecting their resources. So, is your sense is that there’s been a huge spurt over the past decade or two, in terms of the citizen movements forcing their governments to try to protect their resources?

JIM SHULTZ: Well, I think that’s certainly true if you look across Latin America, where citizen movements and more progressive governments have been able to take these kinds of actions. And, look, if you talk to a lawyer who makes $1,000 an hour representing these corporations, they’ll say, “Look, we need legal security. Companies need foreign investment. We need legal security. We’re just trying to protect against the possibility that someone comes in with soldiers and takes away our mine.” But this is not just about them getting the $5 million they put in back. Under these bilateral investment treaties, and certainly it’s going to be the same under the TPP, these corporations can sue for the profits that they expected to earn and didn’t. That’s where you get these sums that are just off the charts.

AMY GOODMAN: President Obama has nominated Michael Froman as Kirk’s replacement for U.S. trade representative. Last year he defended the Trans-Pacific Partnership during a speech at the Center for Strategic and International Studies.

MICHAEL FROMAN: I don’t think I have to tell this audience how important the Asia-Pacific market is to the United States, its manufactured goods, agricultural products or services. It represents 40 percent of global trade. In 2010, U.S. goods exports totaled $775 billion, comprising almost 60 percent of all of our goods exports. And goods exports to the region are up 25 percent over the last two years. For our farmers and ranchers, nearly three-quarters of our total exports go to Asia-Pacific customers. And for our service providers, nearly 40 percent of their total services exports go to the region. And these benefits are not just for the big multinational companies, but for Americans—America’s small- and medium-size enterprises, too, who export over $170 billion to the Asia-Pacific region.

AMY GOODMAN: That’s Michael Froman, the—nominated as the replacement for Ron Kirk as U.S. trade representative. Celeste Drake, if you can talk about the significance of what he said and the TPP, where you’re coming from, from the AFL–CIO?

CELESTE DRAKE: Absolutely. Thank you very much. I mean, we question the wisdom of pursuing the TPP in the first place. We do have, for better or for worse, the World Trade Organization, which has lowered tariffs around the world and has allowed us to increase our exports, as Mr. Froman was explaining in the speech. So what the TPP is about is all of these other things around the tariffs. So it is about these investor state dispute tribunals, it’s about harmonizing rules for food safety, it’s about harmonizing rules for intellectual property—a lot of rules that if citizens aren’t really participating in the formation of those rules, they’re not necessarily going to work out and inure to the benefit of working people and America’s citizens. So we’re very active in following the negotiations, in advocating for better rules that will help workers, real farmers, small businesses, because our past trade agreements, starting with NAFTA and on down the line, have basically been big packages that benefit the 1 percent. And if anybody else benefits, it’s really only by accident and not really by design.

JUAN GONZÁLEZ: Celeste Drake, you’re scheduled to testify on Bangladesh and the situation with workers there. How would these trade agreements impact on this whole issue of the race to the bottom in manufacturing by many international corporations to places like Bangladesh, which result in these tragedies like the Tazreen fire and then the recent building collapse with more than a thousand workers killed?

CELESTE DRAKE: Well, in trade agreements, and beginning with NAFTA, which was a really poor example, the United States has tried to put in so-called labor obligations. In NAFTA, it was a side agreement, largely unenforceable. They’ve gotten better through the years. But they’re really kind of a Band-Aid that tries to fix some of the really destructive patterns that have been caused by globalization. Globalization on a corporate model has led to this race to the bottom, where the world’s biggest corporations really play a game of arbitrage, and they’re pitting especially developing countries one against the other, who can provide the lowest wages, the weakest worker rights regime, the fewest unions. And, you know, the winner is really the loser, because they’ve got workers who are working really hard, putting in a hard day’s work, and very possibly putting their lives at risk, and definitely not raising their standards of living. And when workers in any one country are allowed to be abused like that and have their rights repressed, it actually lowers the wages and the rights for workers all around the world. So, when we can try to improve it slightly through these trade agreements, that’s never going to be the silver bullet to really, really fix the problem. We’ve got to address it globally, because it’s a global problem.

AMY GOODMAN: I also just wanted to point out Michael Froman has been in the news, the U.S. trade representative, longtime White House economic aide, nominated to be Obama’s trade representative, for having nearly half-a-million dollars in a fund based in the Cayman Islands, according to financial documents provided to the Senate Finance Committee. The New York Times says, according to a 2011 document, that Froman had $490,000 in a fund managed by Citigroup based in Grand Caymans Ugland House, a modest whitewashed building that’s been widely cited as a symbol of tax avoidance, since it’s home to nearly 19,000 business entities seeking favorable tax treatment. Jim Shultz, what’s the significance of that and the whole U.S. position on trade, who it is lobbying for?

JIM SHULTZ: You know, I don’t think there’s any question. It’s all about U.S. corporations and large corporations, because if you think about it, what is the biggest threat to the ability of corporations to go into a country, whether it’s El Salvador, Bolivia, anywhere, and suck out the natural resources without any regard for the environment or labor standards? The threat is democracy, right? The threat is that citizens will be annoying, get in the way, and demand that their governments take action. So, what corporations need is they need to become more powerful than sovereign states. And the way they become more powerful by sovereign states is by tangling sovereign states in a web of these trade agreements that allow them to go to tribunal systems like the one at the World Bank and force governments to take these kinds of actions. You know, I was at the U.N. yesterday, and there was a—I was talking about this, and there was a man from Kenya who was explaining, look, these bilateral investment treaties, these investor dispute resolutions, the corporate trade panels, they were imposed on his country, as they were in many countries, by the World Bank as conditions of lending. So, it’s a straightjacket that the U.S. supports, because it is pursuing the interests of U.S. corporations. This has nothing to do with protecting public interest. And it’s a violation of public interest and a blockade against democracy.

JUAN GONZÁLEZ: Jim, I’d like to ask you something not directly related to the TPP, but last month Bolivian President Evo Morales ordered the expulsion of the United States Agency for International Development, USAID—

JIM SHULTZ: Yeah, I heard about that.

JUAN GONZÁLEZ: —from his country. You’re very familiar with the situation in Bolivia. In a speech, Morales cited the recent comments of Secretary of State John Kerry, referring to Latin America as the U.S. backyard. He also accused USAID of using international assistance for political destabilization. Your assess—

AMY GOODMAN: We have a comment of him saying this.

JUAN GONZÁLEZ: And we have a—yeah, we have a comment of Kerry saying that.

PRESIDENT EVO MORALES: [translated] Some institutions from the U.S. embassy continue to conspire against this process, against the people, and especially against the national government. And that is why, using this gathering and the 1st of May, we’ve decided to expel USAID from Bolivia. USAID is leaving Bolivia. I ask our brother foreign minister to immediately speak with the U.S. embassy. No more USAID, which manipulates, uses our brothers with charity.

JUAN GONZÁLEZ: And for our radio listeners, that was obviously not John Kerry, because his Spanish is not that good. That was Evo Morales, the president of Bolivia. Your comments?

JIM SHULTZ: Well, you know, it’s a double-edged sword. There certainly are projects in public health, these kinds of areas, where USAID has provided funding, and it’s not political, and those programs are going to lose their funding. But it’s on the U.S.’s doorstep. The fact is that the United States government has historically used USAID to have a political agenda to strengthen the opponents of the government. And, you know, Bolivians don’t feel any more happy about that than people in the United States would, if we found out that the Chinese government was funding Democracy Now! And so, I think that this is really what’s behind it.

But the reality—and this, I think, is important to know—Bolivia and the United States really don’t have any strategic interests with one another anymore. That’s really the heart of it. Bolivia doesn’t really matter to the United States. It’s not a strategic player. And the United States really doesn’t matter very much to Bolivia. They haven’t had an ambassador since 2007. So, I think that what you’re seeing is—it’s just a bad relationship that is not getting any better. And, you know, there’s always a lot of support in Bolivia when the president says something against the United States, and this is a good time politically for him to do that. You know, USAID’s money has been cut radically over the last few years. There’s just really not much left of the relationship altogether.

AMY GOODMAN: Well, we want to thank you both for being with us, Jim Shultz of the Democracy Center, usually in Bolivia, here going to the United Nations today, and Celeste Drake of the AFL–CIO. The AFL–CIO and Celeste Drake are going to be testifying before the Senate Foreign Relations Committee today on labor issues in Bangladesh.

(*) See this program on Democracy Now.