European Commission: ACTA Is Dead, Long Live ACTA?

US Free Trade Agreements Are Bad Not Just For The Economy, But For The Environment, Too

from the what-was-the-benefit-again? dept

Tue, Oct 22nd 2013 8:12pm — Glyn Moody

A couple of months ago, we reported on some interesting research into the reality of US trade agreements, in contrast to the rosy pictures always painted when they are being sold to the public by politicians. In particular, it turned out that far from boosting US exports and creating more jobs, both the North American Free Trade Agreement (NAFTA) and KORUS, the free trade agreement with South Korea, actually did the opposite -- increasing the US trade deficit with those countries, and destroying hundreds of thousands of American jobs.

But of course bare economic statistics don't capture the full effect of free trade agreements. For example, there is also the environmental impact to consider. An interesting press release from the Sierra Club reports on a meeting held to consider that aspect. It turns out that things look as bad there as they do on the economic front:

"Nearly 20 years into NAFTA and the evidence is in," said Ilana Solomon, director of the Sierra Club’s Responsible Trade Program. "NAFTA led to an expansion of deforestation and unsustainable water use in order to support export-oriented agriculture. It gave massive rights to corporations to challenge environmental and climate safeguards in private trade tribunals. It expanded exports in dirty fossil fuels in a time when we should be moving beyond these outdated fuels and investing in clean energy. Governments must take a page out of the history books and stop negotiating trade pacts that gut protections for our air, water, land, workers, and communities."

That last comment is a clear reference to TPP, but applies equally to TAFTA/TTIP. Both of these are likely to include investor-state dispute settlement (ISDS) measures that allow companies to sue entire nations for alleged "expropriation" of future profits in the "private tribunals" referred to above. One of the ways that governments can be accused of doing that is by strengthening safeguards for the environment, since that often has the knock-on effect of increasing costs for businesses, and thus reducing their future profits. Companies then try to claim ISDS provisions in trade agreements give them the "right" to sue for compensation -- Techdirt recently wrote about a case involving the Canadian province of Quebec.

The problem with ISDS is not just the literally limitless awards that can be made against governments, which have to be paid out of public funds. The mere threat of such actions can have a chilling effect on the formulation of national policy. It's been happening in Canada for over a decade, thanks to the ISDS chapter in NAFTA, as a former government official in Ottawa explained:

"I've seen the letters from the New York and DC law firms coming up to the Canadian government on virtually every new environmental regulation and proposition in the last five years. They involved dry-cleaning chemicals, pharmaceuticals, pesticides, patent law. Virtually all of the new initiatives were targeted and most of them never saw the light of day."

What this means in practice is that ISDS clauses in major US trade agreements currently being negotiated are likely to have the same negative effects on the environment as NAFTA, but on a much greater scale. That's because they involve far larger trade blocs, and recourse to ISDS tribunals has increased greatly in recent years, adding to the credibility of threats to use them unless plans for more stringent environmental policies are dumped. So alongside the dubious economic claims being made for them, which are undermined by the failure of both NAFTA and KORUS to produce the predicted exports or jobs, we can now add the hidden environmental damage as yet another reason to call into question the alleged benefits of both TPP and TAFTA/TTIP.

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Filed Under: economics, economy, environment, korus, nafta, tafta, tpp, ttip

27 Comments

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Reader Comments

The First Word

“

Additional case in point: the ISDS the article above speaks about. They can be good for freeing trade but all to often they allow foreign investors to sue a government even when a law doesn't discriminate against them. Effectively it's protectionism in that case since it protects foreign investors from felling the full force of a law the same way a domestic firm does. Basically it's protectionism for whichever country has the richer corporations when the agreement is signed.

—Anonymous Coward

”

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Anonymous Coward, 22 Oct 2013 @ 9:59pm

This is a complex issue.
Laws are hammers, they nail everything and everyone indiscriminately, it is a poor solution for anything and still we need some, exactly to stop big players from eliminating the good ones for their own benefit while leaving the most harmful ones to small players in place.
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Anonymous Coward, 22 Oct 2013 @ 10:09pm

One word: PROFIT. Anything that interferes with a corporation's profit is to be eliminated, be it people, other companies, the environment, or governments. Corporations are soulless blind money generators. Voting stockholders guarantee that. If left up to corporations, this planet will be stripped to the point of not being able to sustain human life in a short period, less than 200 years. Programs like NAFTA, and TPP only make it easier for them. I pity our great-grandchildren. They will have nothing left.
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Anonymous Coward, 22 Oct 2013 @ 10:41pm

US 'Free' Trade Agreements are not about 'freedom' but about artificially reducing competition. There is nothing capitalistic about what the US does.
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Anonymous Coward, 22 Oct 2013 @ 11:54pm

Re:
Indeed. Those mega-conglomerates can already topple governments, should they so choose. In some cases, this can be seen to have happened. Go look up Glencore Xhasa or Monsanto and see what I mean.
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Ninja (profile), 23 Oct 2013 @ 2:50am

Truth be said, if companies could do away by throwing untreated effluents they would. They already do despite environmental laws forbidding them since the governmental agencies in charge do not have the resources to catch everything and are often tied by bad laws (and seemingly treaties). Corporate America only cares about the environment in front of their customers. Actually, any corporation anywhere.
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Anonymous Coward, 23 Oct 2013 @ 3:39am

Usually anything that is good for the economy it's bad for the environment.
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Ariel, 23 Oct 2013 @ 3:41am

US Trade
Thats right!! Anything that is good for the economy it's bad for the environment
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Anonymous Coward, 23 Oct 2013 @ 4:01am

those that want all these 'profit making' clauses in and the ability to sue a country for lowering it's expected gains is to have all of this stuff dropped in their back yards! let those that want the money, taste the detrimental sides of things too. perhaps then they wouldn't be so keen!!
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Anonymous Coward, 23 Oct 2013 @ 5:01am

Re:
What is in that fracking fluid?
I'm guessing some industrial waste.
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Anonymous Coward, 23 Oct 2013 @ 5:05am

Re: Non Sequitur
Really?
How does that work - exactly.
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Anonymous Coward, 23 Oct 2013 @ 5:06am

Free trade does not mean things are free...I grow free trade popping corn in Ohio and due to terriffs and whatnot...the gvt does get money from the crops I ship to Argentina...Free Trade merely means there's no red tape to negotiate through if you're shipping your product to another country.
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Anonymous Coward, 23 Oct 2013 @ 5:18am

Re:
terriffs are terrific
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Anonymous Coward, 23 Oct 2013 @ 5:40am

Couple abject misconceptions from the article:

Free trade isn't about boosting US exports. It's about increasing trade in general, which always makes everyone better off, and NAFTA has for sure done that.

There were no 'jobs lost' to NAFTA or likely any other free trade agreement. That's just made-up numbers based on examining tiny sections of the economy when the full picture is the economy as a whole. It ignores what free trade is actually for: shifting production away from things our economy doesn't do well and toward things it does do well. Comparative advantage, look it up.

The US centrism is pretty disgusting. NAFTA is directly responsible for a dramatic upswing in the quality of life in Mexico, as an example. A stable democracy south of the borders, modernizing itself rapidly is not only decidedly in the US interest but a good thing in general.

The fact of the matter is that when manufacturing spreads individual pieces of the process to wherever it makes the most sense to use them within the free trade area everyone in the free trade area is better off. In NAFTA's first five years the US added half a million manufacturing jobs on net. Where's the 'hundreds of thousands' of losses? Imagined. Made up. It's only there if you blind yourself to where jobs were added and completely ignore the way a free trade agreement is supposed to work.
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Anonymous Coward, 23 Oct 2013 @ 5:41am

Re:
It is true that often times protectionism and mercantilism are hidden behind the 'free trade' label and that's unfortunate. Case in point: exporting IP laws.
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Anonymous Coward, 23 Oct 2013 @ 5:47am

Re: Re:
Additional case in point: the ISDS the article above speaks about. They can be good for freeing trade but all to often they allow foreign investors to sue a government even when a law doesn't discriminate against them. Effectively it's protectionism in that case since it protects foreign investors from felling the full force of a law the same way a domestic firm does. Basically it's protectionism for whichever country has the richer corporations when the agreement is signed.
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any moose cow word, 23 Oct 2013 @ 6:05am

Re:
Unfortunately "capitalism" is becoming synonymous with plutocracy.
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any moose cow word, 23 Oct 2013 @ 6:14am

Re:
Right, and all the manufacturing that was exported to Asia, where labor is cheap and environmental standards are largely unforced, was a huge boon for the displaced labor in the US and the Asians left crippled or dead from the toxic chemicals.
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Pragmatic, 23 Oct 2013 @ 6:34am

Re:
Artificially reducing competition is EXACTLY what capitalism IS. Are you having a unicorns and rainbows moment? Capitalism is about the economy, stupid. Our economy is their playground and they will add and subtract according to their bottom line. And they will leave, like migratory beasts, for fresh pastures, when these ones dry up.

That's why the jobs got outsourced to India. When the Indian workers demanded higher pay, the jobs began to trickle back here. That's why China is falling out of favor and Vietnam is becoming the Next Big Thing.

Pay attention, you might learn something, starting with "Capitalism is not intrinsically good, it's all about the bottom line."
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Anonymous Coward, 23 Oct 2013 @ 7:05am

Fracking for oil and natural gas is a bad idea. All those chemicals that are mixed with the water and pumped down a hole at high pressure.

Then all those chemicals contaminate the ground water. Which is our drinking water!

Nothing like poisoning the local populous' drinking water for hundreds of years just so a company can frack an area for 10 years.
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Anonymous Coward, 23 Oct 2013 @ 7:32am

Re: Re:
I can't really tell what point it is you're trying to make but if you're really concerned with lax environmental standards in China and that their labor is underpaid relative to the rest of the world the best way to combat both problems is trade liberalization.
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Anonymous Coward, 23 Oct 2013 @ 7:36am

Re: Re:
Artificially in this case refers to government intervention. That's the opposite of what capitalism IS. You're confusing what capitalism actually is with what some plutocrats do while warping themselves up in rhetoric.
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Pragmatic, 23 Oct 2013 @ 7:46am

Re: Re: Re:
Fair enough, AC, but that has always happened, since Captitalism was first conceived. The Opium Wars were a result of the UK govt. messing with China to fix the trade deficit; basically, China wanted nothing they had so the East India Company got the people hooked on dope, then the UK govt. waded in to help when the Chinese started trying to stop it.

Since corporations are a creature of govt., which OFTEN intervenes to protect their bottom line (how many examples do you need?) how do you separate the two?
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Anon-Y-Mouse, 23 Oct 2013 @ 12:44pm

Need to base tariffs on the difference between the costs for wages, benefits, and environmental costs.
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any moose cow word, 23 Oct 2013 @ 3:13pm

Re: Re: Re:
The solution to problems caused by lax trade regulations is trade liberalization?
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Anonymous Coward, 23 Oct 2013 @ 5:56pm

Re: Re: Re:
translation:
I really do not feel like addressing the points you raised, so I'll pretend to not understand - and then state the answer to the not understood issue is to continue the present horrible policies.
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Anonymous Howard (profile), 24 Oct 2013 @ 7:10am

Re: Re:
Don't be lazy google it
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Kevin, 3 Feb 2014 @ 2:42am

Response to: Anonymous Coward on Oct 23rd, 2013 @ 5:40am
If no "net" jobs were lost as you claim to NAFTA in the US why does the Magority of Americans oppose free trade deals? No! A prosperous Mexico does nothing to expand US prosperity. Things the US does not do well are simply sent to free trade nations that do that portion of production better. Incorrect,we were producing those things very well for decades prior to "free trade". Production is sent to nations who have lower labor cost not because they produce better. Free trade is designed by big corporations for big corporations. Hence a Wal mart in every town that once stood a family run and owned business. If free trade is so great ask any American over the age of fifty if they would rather have the economy we had prior to free trade. My answer would be an overwhelming yes.
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