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Bilateral Trade and Investment Deals: BITs a serious challenge for global justice movements
We cannot afford to bask in the movement successes at the World Trade Organization (WTO) talks at Cancun. With echoes of Bushs either with us or against us dualism, U.S. Trade Representative Robert Zoellick announced that the U.S. would push ahead with free trade and investment agreements with can-do countries on a subregional or bilateral basis. Thisand the European Unions (EU) post-Cancun statements that it may restart a program of bilateral trade negotiationsshould highlight the urgent need to oppose the bewildering web of bilateral trade and investment agreements.
Expanding the liberalization agenda through bilateral agreements is a stealthy step-by-step approach that could prepare a multiple launch pad for more comprehensive regional or multilateral agreements. It is a divide and rule approach, to break up the kinds of alliances formed between Southern governments in multilateral forums like the WTO to resist U.S., Japanese, and EU demands. Bilateral agreements can serve as templates for broader negotiations. Once countries are locked into bilateral investment agreements, it will be harder to resist an MAI-type agreement at the WTO or FTAA. Governments of smaller, poorer countries are struggling to find the necessary resources to simultaneously negotiate several complex deals.
Many bilateral free trade and investment agreements contain similar provisions as well as national treatment clauses, which state that foreign companies and investors must be treated no less favorably than local companies and investors. Alongside the proliferation of bilateral investment treaties (BITs), many bilateral free trade agreements (FTAs) also contain similar investment provisions, besides expansive coverage of sectors like services, intellectual property, government procurement, and agriculture. Many of these provisions go well beyond WTO commitments.
With fast track Trade Promotion Authority under its belt, the Bush administration is aggressively pursuing bilateral trade and investment agreements. It wants to stitch up bilateral and regional deals, just as the EU has been doing, to secure greater access and control for U.S. companies. Dangling the carrot of preferential access to a multi-billion dollar market, the U.S. is also using them as a sharp stick to target, dismantle, or reshape policies to suit U.S. economic and geopolitical interests.
Besides using Octobers Asia Pacific Economic Cooperation (APEC) summit in Bangkok to demand support for his war on terror, George Bush formally announced that negotiations on an FTA with Thailand would start in 2004. Meanwhile, a Thai-Australia Closer Economic Relations Free Trade Agreement is scheduled to take effect on January 1, 2005. The U.S. and Australia are also in negotiations for an FTA, while both countries have concluded bilateral trade and investment agreements with Singapore.
11, NAFTAs powerful investment chapter, provides corporations
with the right to sue governments for enacting any public policy
or law that they do not like. Meanwhile, the MAI, drawing from NAFTA,
was dubbed a charter or rights and freedoms for transnational
corporations. It would have prevented governments from limiting
what foreign investors could own or from imposing performance requirements
on them to use a set amount of local content or hire local managers
or staff, or to share technological know-how. It would have facilitated
easier access for investors to be able to move assetsfinancial
instruments or production facilitiesacross borders, regardless
of social or ecological considerations. It would have guaranteed
free transfer of all payments relating to an investment in and out
of a country.
The MAI is far from dead. Many bilateral free trade/investment agreements already contain similar provisions. The U.S. insists that they are part of any new negotiations.
In many BITs, where a dispute cannot be settled amicably and procedures for settlement have not been agreed on within a specified period, they can be referred to the International Centre for Settlement of Investment Disputes (ICSID) or the UN Commission on International Trade Law (UNCITRAL). NAFTA lets unhappy investors choose between the two. Either way, they represent the privatization of commercial justice.
Founded in 1966, over half of ICSIDs cases were filed in the past six years, mainly under investment treaties. Today, there are some 2,000 BITs. UNCTAD describes them as the most important protection of international foreign investment to date. Many disputes relate to contracts arising from the privatization of public services.
In a speech to the Inter-American Development Bank in October 2000, William D. Rogers, of the Washington, DC law firm Arnold and Potter, argues that investment treaties are an open invitation to unhappy investors, tempted to complain that a financial or business failure was due to improper regulation, misguided macroeconomic policy, or discriminatory treatment by the host government and delighted by the opportunity to threaten the national government with a tedious expensive arbitration.
Even before such a powerful tool can be expanded and applied to 34 countries throughout the Americas under the FTAA, countries like Bolivia and Argentina have already been sued under obscure BITs. The popular struggle against the privatized water system in Bolivias third largest city, Cochabamba, is a symbol of the fight back against neoliberalism and privatization. This followed Aguas del Tunari, an affiliate of the U.S. corporation Bechtel, sharply increasing prices. After the privatization was reversed, the water system was handed back to the public. Aguas del Tunari/Bechtel lodged a request for arbitration against Bolivia at ICSID. It is seeking $25 million, claiming as expropriated investment the millions of dollars in potential profits it had hoped to make. The company used a 1992 BIT between Holland and Bolivia. While it was establishing its operations in Cochabamba, Bechtel was craftily filing papers to shift its subsidiarys corporate registration to Holland from the Cayman Islands.
a former subsidiary of Enron, won a bid to run the privatized water
and sewage system for 2.5 million people in parts of Buenos Aires
province, Argentina in May 1999. Bahia Blanca residents complained
that their water smelled and looked brown, while regulators considered
sanctions against Azurix for low water pressure. After the water
supply was found to be contaminated, health authorities warned people
not to drink or bathe in the water. The local regulating agency
forced the company to deliver free bottled water to all those affected,
not to charge for a period when the water was of poor quality, and
also fined Azurix for breach of contract. In October 2001, Azurix
said that it would withdraw from the contract, complaining that
the province would not let it charge rates according to the tariff
specified in the contract and would not deliver infrastructure.
The province rejected the termination notice. Then, under a 1991
U.S.-Argentina bilateral investment treaty, Azurix sued Argentinas
bankrupt government for $550 million. Azurix says that the authorities
actions amount to interference with its investment.
In July, the French utility corporation Suez launched three cases against Argentina for alleged breaches of a France-Argentina BIT arising from three separate water concessions in Cordoba, Buenos Aires, and Santa Fe. The Spanish company Telefonica has also brought a claim against Argentina, and CMS Gas Transmission Co. is suing Argentina under the U.S.-Argentina BIT.
Pakistan currently faces three investor-state dispute claims pending at ICSID totaling around $1 billion. The Swiss company SGS, whose board of directors includes former WTO Director-General Mike Moore, is claiming $120 million from Pakistan for premature termination of a contract to provide pre-shipment inspection services, an alleged breach of a 1996 Switzerland-Pakistan BIT. An ICSID panel met in Paris in February to consider the case but reserved its judgment.
The Italian construction firm Impregilo, which headed the consortium to build the controversial Ghazi Barotha dam, part of a major hydroelectric project, wants $450 million. Using a Pakistan-Italy BIT, Impregilo claims Pakistans Water and Power Development Authority (WAPDA) breached its contractual commitments. Turkish company Bayinder filed a similar-sized claim over termination of its motorway construction contract. Like many other BITs, the definitions of investment and other terms in the agreements, which Pakistan signed, are very broad and afford investors ample opportunity to claim against a frighteningly wide range of actions or omissions by the government and its agencies.
Domestic courts can be sidestepped by investors recourse to international arbitration panels. ICSID and UNCITRAL only allow for the investor and government parties to the dispute to have legal standing. The public has no right to listen to proceedings or view evidence or submissions. Both bodies require only minimal disclosure of the names of the parties and a brief indication of the subject matter. That makes such disputes very difficult to track, let alone mobilize around. There is little incentive for investors to settle disputes amicably given the highly favorable outcomes for corporations, which have initiated proceedings under such agreements.
business law firms that specialize in such cases are laughing all
the way to the bank. However ICSID rules, these cases will cost
millions of dollars to the targeted country. Citizens will shoulder
these costs which will increase their indebtedness to international
financial institutions, while compliance will be linked to future
foreign aid commitments and loans.
With presidential elections looming, the Bush administration will be careful to use its bilateral strategy to advance the economic interests of U.S. service and pharmaceutical sectors while trying not to alienate domestic corporate agricultural lobbies. U.S. farm lobbies have been urging Washington not to improve market access to Australian exports of sugar, dairy, and beef by reducing tariffs through its FTA negotiations and have objected to the idea of a future U.S.-New Zealand Free Trade Agreement for similar reasons.
The U.S. explicitly links support for the war on terror with willingness to negotiate trade and investment deals. While a planned FTA with a moderate Muslim country like Morocco offers much political capital for the U.S., U.S. corporations are open about their own capitalistic interests. The U.S.-Morocco FTA Coalition, comprising U.S. corporations and pro-free trade organizations, wants to lock in Moroccos economic reforms and get access to Moroccos markets, including its telecommunications, tourism, energy, entertainment, transport, financial services, and insurance sectors. It wants a tighter Moroccan intellectual property regime and better market access for U.S. agribusiness.
In FTA negotiations with Australia, the U.S. seeks the removal of all restrictions on investment like Australias Foreign Investment Review Board and limits on foreign investment in airlines, media, and telecommunications. U.S. negotiators, urged on by U.S. pharmaceutical industries, want to get rid of Canberras Pharmaceutical Benefits Scheme, which sets price controls for many prescription medicines. U.S. drug companies want more profits from higher pricing and full market access for their products. These are some of the rewards for Australias loyal support for the U.S. war on Iraq.
The U.S.-Chile FTA aims to add momentum to FTAA negotiations and counter growing opposition from a number of governments and social movements to the proposed hemispheric agreement.
The Chile and Singapore FTAs with the U.S. have NAFTA-plus broad definitions of investment, which throw the door wide open for disgruntled investors to take a case to a dispute tribunal. Intellectual property provisions go even further than the WTOs TRIPS (Trade-Related aspects of Intellectual Property rights) agreement, severely limiting the grounds for allowing use of compulsory licensing of medicines and effectively extending the 20-year term of drug company patent monopolies by an additional five years, threatening access to affordable medicines, not least HIV/AIDS drugs.
Both agreements impose alarming new limits on the use of capital controls. In an April 2003 article, Indian policy analyst and researcher Kavaljit Singh argues that Chiles controls on capital inflows have helped insulate it against financial crises. He says it stands to reason that the probability of occurrence of a financial crisis in Chile and Singapore would increase manifold with the removal of capital controls as envisaged in the bilateral trade agreements with the U.S.
Even free traders have slammed this aspect of these FTAs. In a March 2003 Financial Times article, Jagdish Bhagwati and Daniel Tarullo wrote, The intention of the Bush administration to use these two agreements as templates for other trade agreements, possibly including the Doha round, means that acceptance of the capital control provisions could engender a trade policy that causes far-reaching damage. The prohibition on capital controls has the makings of a U.S. foreign policy debacle. Imagine that a government imposes short-term capital controls in order to manage financial problems. Compensation will ensue, but only for American investors. The citizens of the developing country will then see a rich U.S. corporation or individual being indemnified while everyone else in the country suffers from the crisis. One would be hard-pressed to think of a better prescription for anti-American outrage.
Many of us were saddened and inspired by the suicide of South Korean farmer Lee Kyung Hae at Cancun, protesting the effects of the WTO on farmers. Perhaps we can also learn from the way that Korean social movements have mobilized against bilateral trade and investment agreements. They quickly identified proposed BITs with the U.S. and Japan as MAI clones. Recent negotiations on an FTA with Chile met strong opposition led by Korean farmers, including nationwide demonstrations and a protest camp outside the National Assembly.
To overlook the global explosion of bilateral trade and investment agreements is to risk creating an achilles heel for movements against neoliberal globalization. In tandem with our struggles against the WTO and FTAA, we need to rapidly develop strategies that confront the growing web of bilateral agreements.
Aziz Choudry is an activist and writer with New Zealand-based GATT Watchdog.
Z Magazine Archive
HUMAN RIGHTS - The U.S. Human Rights Network will celebrate its 10th anniversary with the Advancing Human Rights 2013 Conference, December 6-8, in Atlanta, GA.
Contact: 250 Georgia Avenue SE, Suite 330, Atlanta, GA 30312; email@example.com; http:// www.ushrnetwork.org/.
AFRICAN/SOCIALIST - The Sixth Congress of the African People’s Socialist Party USA will be held December 7-11, in St. Petersburg, FL.
Contact: 1245 18th Avenue South, St. Petersburg, FL 33705; 727- 821-6620; info@aps puhuru.org; http://asiuhuru.org/.
SCHOOLS - The Dignity in Schools Campaign (DSC) will host a workshop on the DSC “Model Code on Education and Dignity: Presenting A Human Rights Framework for Schools” at the Mid-Hudson Region NY State Leadership Summit on School Justice Partnerships, December 11 in White Plains, NY.
Contact: http://www.dignityin schools.org/.
ANARCHIST/BOOKFAIR - The Humboldt Anarchist Book Fair will be held December 14, in Eureka, CA.
Contact: humboldtgrassroots @riseup.net; http://humbold tanarchist bookfair.wordpress. com/.
CLIMATE - The World Symposium on Sustainable Development at Universities is hosting a follow-up event to the 2012 Rio de Janeiro symposium. The gathering will be held in Qatar on January 28-30, 2014.
Contact: http://environment.tufts. edu/.
LABOR - The United Association for Labor Education (UALE) will host Organizing for Power: A New Labor Movement for the New Working Class in Los Angeles, March 26-29. Proposals are due December 15.
Contact: LAWCHA, 226 Carr Building (East Campus), Box 90719, Duke University, Durham, NC 27708-0719;lawcha @duke. edu; http://lawcha.org/.
MEDIA FELLOWSHIP - The Media Mobilizing Project is seeking applicants for the first annual Movement Media Fellowship Program. The Fellow will work with MMP to produce the spring season of Media Mobilizing Project TV. MMPTV is a news and talk show that tells the stories of local communities organizing to win human rights and build a movement to end poverty.
Contact: 4233 Chestnut St., Philadelphia, PA 19104; 215-821- 9632; milena@media mobilizing.org; http://www.media mobilizing.org/.
RACE - The 7th Facing Race: A National Conference will be held in Dallas, TX November 13-15, 2014. Organizers, educators, artists, funders and everyone interested in racial equity is invited to exchange best practices and learn about innovative models and successful organizing initiatives. Proposals must be submitted by January 24, 2014.
Contact: Race Forward, 32 Broadway, Suite 1801, New York, NY 10004; 212-513-7925; media @raceforward.org; http://race forward.org/.
VETERANS - They Were Soldiers: How the Wounded Return from America’s Wars - The Untold Story, by Ann Jones, is about the journey of veterans from the moment of being wounded in rural Afghanistan to their return home.
Contact: Haymarket Books, PO Box 180165, Chicago, IL 60618; 773-583-7884; http://www.haymarketbooks.org/.
LIBYA - Destroying Libya and World Order: The Three-Decade U.S. Campaign to Terminate the Qaddafi Revolution, by Francis A. Boyle, is a history and critique of American foreign policy from Reagan to Obama.
Contact: Clarity Press, Inc., Ste. 469, 3277 Roswell Rd. NE, Atlanta, GE 30305; 404-647-6501; firstname.lastname@example.org; http://www. claritypress.com/.
CHILDREN - Fannie and Freddie by Becky Z. Dernbach is about two bumbling villains who gamble away the savings of the people of Homeville.
Contact: fannieandfreddiebook @gmail.com; http://fannieand freddie.org/.
PROTEST/COMIC - Fight the Power!: A Visual History of Protest Among English Speaking Peoples, by Sean Michael Wilson and Benjamin Dickson is a graphic narrative that explains how people have fought against oppression.
Contact: Seven Stories Press, 140 Watts Street, New York, NY 10013; 212-226-8760; info@ sevenstories.com; http://www. sevenstories.com.
CHILDREN - Brave Girl by Michelle Markel and illustrated by Melissa Sweet is the true story of Clara Lemlich, a young Ukrainian immigrant who led the largest strike of women workers in U.S. history.
Contact: http://www.harpercollins childrens.com/Kids/.
FESTIVAL - The 2014 Queer Women of Color Film Festival will be held June 13-15 in San Francisco. The festival is currently accepting submissions until December 31.
Contact: QWOCMAP, 59 Cook Street, San Francisco, CA 94118-3310; 415-752-0868; email@example.com; http://www.qwocmap.org/.
IRAQ/REFUGEES - Ten years after the U.S.-led war in Iraq, thousands of displaced Iraqi refugees are still facing a crisis in the United States. The Lost Dream follows Nazar and Salam who had to flee Iraq in order to avoid threats by Al- Qaeda-affiliated groups and Iraqi insurgents that consider them “traitors” for supporting U.S. forces in Operation Iraqi Freedom.
Contact: Typecast Films, 888- 591-3456; info@type castfilms. com; http://type castfilms.com/.
HUMAN RIGHTS - Lyrical Revolt! III will be held December 4 in Syracuse, NY. The event will feature hip-hop musician Anhel whose album Young, Gifted, and Brown was just released. The event is sponsored by ANSWER Syracuse, Liberation News, and SyracuseHip Hop.com. Performers and artists are encouraged to send submissions.
Contact: firstname.lastname@example.org; http://www.answercoalition.org/syracuse/.
FOLK - Musician Painless Parker has released his album Music for miscreants, malcontents and misanthropes featuring “Fuck Yeah, the Working Class.”
Contact: email@example.com; http://painlessparkermusic.com/.
COMEDY - Political comedian Lee Camp’s new album Pepper Spray the Tears Away has been released.