Constitution? Forget It! NAFTA Rules
Remember MTBE, the carcinogenic gasoline additive that has been leaking into the ground water in Santa Monica, Lake Tahoe and 10,000 wells throughout California? Did you think the problem was under control after Gov. Gray Davis ordered a phaseout of the chemical by 2002? Better think again.
Davis is merely the highest elected official of the state. What does he know? Such matters have been turned over to corporations these days, who know better. In particular, Methanex Corp. of Canada, a manufacturer of MTBE, knows better. It says government can’t ban the stuff, and if government even tries to do that, it will have to pay the corporation for lost profits. Methanex’s stock lost $150 million in the 10 days following Davis’ announcement of his phaseout order. So Methanex is suing in a trade tribunal for that and future losses to the tune of $1 billion.
The company’s suit would be tossed out of any federal court because under the Constitution, government doesn’t have to pay for lost business expectations when it regulates. In fact, Republicans failed to get a “regulatory takings” bill through the last Congress that would have reversed that rule; opponents pointed out that the fanatical bill would either bankrupt government or force repeal of most regulations.
Methanex, however, is not in federal court. It is in the quiet, confidential dispute resolution process set up under the North American Free Trade Agreement. The free-trade ideologues who drafted NAFTA saw nothing fanatical about putting a regulatory takings clause into the treaty. Now the price is being paid.
In a case much like Methanex’s, the Ethyl Corp. of the U.S. sued Canada for banning Ethyl’s toxic gasoline additive, MMT. Advised that it would lose the NAFTA case, Canada apologized to Ethyl, paid $13 million to settle and repealed its law.
Similar cases are pending. A California company, Metalclad, is suing Mexico for $90 million for the lost business opportunity to run a hazardous waste dump in San Luis Potosi after angry residents objected. S.D. Myers Inc., an Ohio firm that incinerates PCBs, is suing Canada for $20 million in lost business after Canada, fulfilling its obligation under an international environmental treaty, forbade shipments of PCBs out of the country. A Canadian funeral business, Loewen Group Inc., is suing the U.S. for $725 million because a large jury verdict in Mississippi found it had engaged in fraud. The civil court and jury system of Mississippi, says Loewen, amounts to an unfair burden on its business, entitling it to compensation under NAFTA from the U.S. government.
The regulatory takings clause is but one of numerous provisions in NAFTA assuring that, when trade clashes with the environment or social values, trade always wins. The same is true of the General Agreement on Tariffs and Trade, the proposed Africa trade bill and proposed Multilateral Agreement on Investment. The drafters of these documents, ignorant of basic ecological economics, assumed that we would always be better off if trade trumped all other values, including Mother Nature. The environment, labor and human rights are systematically subordinated to trade in all these laws. Thus, under the GATT, we have recently lost challenges to our federal laws on dolphins, sea turtles and dirty imported gasoline.
President Clinton told the World Trade Organization last year that “we must do more to ensure that spirited economic competition among nations never becomes a race to the bottom--in environmental protections, consumer protections or labor standards.” But this is the very president who signed away our sovereign authority to protect those things. The only way to accomplish his new objective is to repeal the clauses that allow trade to ride roughshod over these concerns.
Clinton is not proposing to touch those clauses. Instead, he and Vice President Al Gore propose to expand the trade treaties and engage in mere happy talk about their environmental and human impact. This half-hearted, unworkable centrist approach has now put Gray Davis in a bad spot. It looks like we are all going to be endangered by MTBE for some time, and Davis is impotent to do anything about it.
Fence-sitter that he is, he declared himself “neutral on NAFTA” during his campaign. Now Davis has been impaled in delicate places by the NAFTA fence he chose to straddle.
