The Right and US Trade Law: Invalidating the 20th Century
V. Property vs. People
As the huge Chapter 11 claims accumulated (eighteen or more so far), Mexico City, Ottawa and Washington gradually awakened to their problem. Mexico lost the $16 million Metalclad case, involving a notorious hazardous-waste site as bad as Love Canal, and saw its arguments for protecting health and safety brushed aside by arbitrators as irrelevant. Mexico City, recognizing that it is a prime target, assembled an all-NAFTA team of lawyers who aggressively defend against every case. "Otherwise," one of them said, "we were going to become the insurer for every investment that goes awry in Mexico." Canada was stung and embarrassed by its own losses and began urging the other governments to join in issuing a binding "interpretative statement" that would reduce Chapter 11's scope and wall off legitimate regulatory powers from attack.
Washington wasn't interested at first and, indeed, assisted US companies in developing claims. The Clinton Administration got nervous, however, after Methanex and other provocative cases were filed. Would Americans accept such foreign assaults on US law as a necessary part of how "free trade" supposedly spreads "democracy" worldwide? Meanwhile, unknown to the public, an intense policy debate developed--EPA, Interior and Justice's environmental lawyers versus Treasury, State and Commerce. "Inside the government, the divisions were clear and painful," said John Audley, who participated for EPA. "Some agencies were saying, 'We got it wrong in NAFTA and we have to change it.' The others were saying, 'No, we don't accept that interpretation. In fact, we like Chapter 11 so much, let's negotiate it again.' The substantive differences were pounded out through horrible meetings and fifty-, seventy-five-page documents. We simply couldn't work it out." On the last days of Clinton's presidency, the agencies were still at the table arguing, without resolution.
The interagency conflict has presumably subsided now that business-friendly Republicans are heading the regulatory agencies, but Trade Representative Zoellick has revealed his nervousness too--worried that rising concerns in Congress might get in the way of fast-track approval for the FTAA negotiations. Zoellick recently worked out with Mexico and Canada an officially binding "clarification" that promises more procedural openness in arbitration panels, rules out one key legal premise and may deprive Methanex of its best argument. "I think they were scared to lose the case, so they changed the rules," said Professor Stumberg. But even if Methanex does lose, the basic problems are not fixed: Zoellick's corrections do not address the core issues of expanded property rights versus public regulation. If he gets the votes for FTAA fast-track negotiations, NAFTA's "regulatory takings" will be promoted to cover the entire Western Hemisphere.
The political ingredients are present--at the Supreme Court, in Congress and the White House, and in trade diplomacy--to work a reactionary transformation of American governance and rights. I do not say this will necessarily occur. I do not think it can if Americans at large become sufficiently alert and mobilized in opposition. But, as this account should make obvious, the danger exists, and no one can count on conservative self-restraint or vigilant media or the other self-correcting mechanisms in representative democracy to prevent it. The cause has gotten this far with very little recognition or understanding of what's at stake. Many right-wingers sense they are at the brink of an epic triumph over liberal government's long domination; their objective is aligned with influential multinationals that intend to keep what they have already won.
The opposition must purposefully raise the stakes too--forcing these arcane matters into wider public awareness and delivering a stark warning to political elites. If they persist in this objective, they will ignite a grave constitutional crisis that could destroy the legitimacy of law and representative government in public consciousness, that could send angry citizens into the streets to fight for their rights. Democrats, if they have the backbone, will draw a hard line of opposition, but Republicans should also consider whether they wish to advance this revolutionary upheaval in long-established rights at a time when the country is so embattled.
Senate Democrats, given what has already transpired, are fully justified in rejecting any nominee for the federal judiciary, especially the Supreme Court, who sympathizes even distantly with Epstein's radical reinterpretation of the Constitution. Likewise, it is quite wrong to confirm nominees for law-enforcement positions at Justice or the regulatory agencies who demonstrably do not accept the settled terms of property versus public rights.
On the global front, if the Bush Administration wishes to keep America united, it can promptly defuse this fight--first by announcing that Chapter 11's peculiar privileges for investors will not be proposed for any future trade agreements and, second, by suspending NAFTA's "investor-state" enforcement mechanism in agreement with Canada and Mexico, at least until the subject is submitted to serious scrutiny and the full public debate it never received the first time around. Otherwise, Democrats, including free traders, should unite to block FTAA or any like-minded proposals. Opportunistic right-wingers in and out of government may be thinking they can fog the issue past Americans preoccupied with terrorism. Democrats might assume an accommodationist stance in the name of patriotism. If that occurs, both parties deserve contempt and attack. The antiglobalization movement,which suspended its protests in deference to the crisis, may have to remobilize quickly. This time deep throngs should surround not the IMF and World Bank but the White House, the Capitol and the Supreme Court as well.
The demonstrators should also target the lofty nameplates of America's multinational corporations and banks. If some sources are correct, US companies are more ambivalent about Chapter 11 than the lawyers who represent them. Perhaps they did not fully understand what they were promoting in NAFTA, any better than politicians or the public did. To test the proposition, these firms should be pressured directly to back off. If they refuse to concede, they will find that the controversy generated by their exclusive rights may well doom their other long-term objectives in globalization politics. In other words, the mighty are vulnerable on this issue, and some of them evidently know it. While the ranks of citizen protesters gather to confront titans of global commerce and finance, they may also wish to send marchers on some of those Washington law firms.