Transcript Vermont Commission on International Trade and State

Vermont Commission on
International Trade and
State Sovereignty
Overview of
International Trade
and Its Impact on
Vermont’s Environment
Vermont Legislative Council
November 13, 2007
The Commission on International Trade and
State Sovereignty Shall:
•
annually assess the legal and economic impacts of
trade agreements on state and local laws, state
sovereignty, and the business environment;
•
provide a forum for citizens and legislators;
•
make recommendations to the general assembly,
governor, and congressional delegation that are
designed to protect the state’s job and business
environment and state sovereignty from any
negative impacts of trade agreements;
2
•
work with interested groups from other states to
resolve the conflicting goals and tensions between
international trade and state sovereignty;
•
on request from the governor or the general
assembly, develop recommendations regarding
challenges and opportunities posed by a particular
agreement;
•
submit an annual report.
3
The Commission on International Trade and
State Sovereignty May:
•
recommend legislation or preferred
practices;
•
develop recommendations regarding
challenges and opportunities posed by a
particular agreement.
4
What is International Trade and
What are International Trade Agreements?
•
International Trade is the exchange of
goods and services across international
boundaries or territories.
•
International Trade traditionally was
conducted according to agreements
between two countries. Such agreements
are referred to as bilateral agreements.
5
What is International Trade and
What are International Trade Agreements?
•
Beginning in 1944 at Bretton Woods, trade
began to be considered in a global manner and
global economic institutions were created
to help regulate its conduct.
•
Some of these organizations include:

The World Bank

The International Monetary Fund (IMF)

The Global Agreement on Tariffs and Trade
(GATT)
6
Evolution of the International Trading System
In the U.S. …
•
1974 — “Fast-track” authority was established,
streamlining congressional consideration of
trade bills.
•
1979 — Office of U.S. Trade Representative (USTR)
was created by Executive Order. USTR is part of
the Executive Office of President. It is not subject to
Freedom Of Information Act (FOIA) requests.
USTR consults states through the Inter-Governmental
Policy Advisory Committee (IGPAC) and State
Single Points of Contact (SPOCs).
•
7
Evolution of the
International Trading System
•
In 1994, the “Uruguay Round” global trade
discussions were completed and the
World Trade Organization (WTO)
was created.
•
The WTO now has 149 members.
8
Evolution of the
International Trading System
•
WTO agreements include:







Goods
Services
Government procurement
Agriculture
Intellectual property rights
A binding dispute resolution system
More than a dozen separate agreements
9
Evolution of the
International Trading System
Since the Uruguay Round…

North American Free Trade Agreement (NAFTA)

U.S. – Singapore Free Trade Agreement

U.S. – Chile Free Trade Agreement

U.S. – Australia Free Trade Agreement

Central American Free Trade Agreement (CAFTA)
10
Land Use
Under the General Agreement on Trade in Services
(GATS), the state’s ability to regulate land use under
Act 250 and the towns’ planning and zoning powers
under Ch. 117 may be subject to attack regarding
regulation of:
•
the wholesale or retail sales sectors, or
•
the hotel and restaurant sectors.
11
Land Use
Grounds for attack may be that those
regulations may limit:
•
•
•
•
the number of service suppliers,
the total value of service transactions,
the quantity of service output, or
the number of natural persons that a business
may employ.
12
Utility Regulation
Under GATS, Vermont’s ability to regulate electricity
may be subject to attack:
•
for not being “objective,” because the law
requires a subjective finding that a project
serves the public good;
•
for requiring an “economic needs test”;
•
for setting contingent portfolio standards
that require renewable resources but
exclude large hydro;
•
for limiting the number of service suppliers
in a given service territory, e.g. where a
municipality operates an electric system.
13
Utility Regulation
•
Services “supplied in the exercise of
government authority” are exempt
from GATS if “supplied neither on a
commercial basis, nor in competition
with one or more service suppliers.”
•
Thus, a municipal power system would
not appear to be exempt.
14
Water Services
•
The European Union has requested that the
United States commit to including water services
under GATS.
•
Water services would include municipal
drinking water services and supplies.
•
If water services were included under GATS,
traditional state and municipal regulation of
water services and supply would likely be
in conflict with “market access” rules.
•
Market access rules restrain governments from
limiting the number of service suppliers, the number
of outlets, or the degree of foreign ownership.
15
Water Services
•
Most U.S. drinking water systems are in public hands
and limit the ability of other water treatment plants or
providers to sell into the same service area. These
limitations would violate the market access rules.
•
The USTR has stated that public water services
are exempt from the definition of services
because they are “supplied in the exercise of
government authority.”
•
But the exemption requires services to be “supplied
neither on a commercial basis, nor in competition
with one or more service suppliers.”
•
Presence of a private provider or assessment of fees
would defeat the exemption.
16
Water Services
•
If U.S. commits water services under GATS,
state grants or loans that are funded by the
E.P.A.’s state revolving fund could violate the
national treatment rules, if the grants are issued
only to public providers.
•
“National treatment rules” require governments
to treat foreign service providers at least as well
as domestic providers.
17
Investment Claims
•
“Investor-state provisions” or “Chapter 11
provisions” allow foreign investors themselves to
bring arbitration proceedings against Party countries,
as opposed to the historical approach which only
allowed a government to sue another country.
•
Many U.S. companies establish offices in Party
countries, from which they may sue the U.S. under
arbitration procedures, thereby possibly avoiding
state law and gaining a competitive advantage over
companies that obey state law.
18
Investment Claims
•
For example, NAFTA Chapter 11 prohibits
a country from directly or indirectly
expropriating an investment of an
investor of another country or taking
measures tantamount to expropriation,
except with just compensation.
•
But “expropriation” and “tantamount to
expropriation” are not defined in the
agreements.
19
Investment Claims
Although U.S. law urges that foreign investors should
get no greater substantive rights than U.S. investors,
arbitration opinions allow broader recovery than is
possible under U.S. law.
•
“Investments” are defined broadly, to include
commitment of capital, expectation of gain or profit, and
assumption of risk;
•
U.S. takings cases consider property rights “as a whole.”
Under arbitration, each component of a property right –
physical, functional, and temporal – may be considered
individually, and each may be expropriated; and
•
U.S. takings cases require a finding of “significant”
economic impact. Arbitration panels noted that
partial or temporary deprivations of rights can
constitute expropriation.
20
Investor-State Disputes:
Glamis Gold Ltd. v. U.S
•
Glamis, a Canadian mining company, is a target of
large protests over forest destruction and water
contamination in Honduras.
•
Glamis proposed massive open-pit cyanide “heap-leach”
gold mining involving use of large amounts of water, in a
California pristine area near tribal ancestral sites.
•
Clinton administration denied permit, Bush administration
reversed. California passed law requiring backfilling of
open pit mines near sacred sites.
•
In 2003, Glamis filed a NAFTA claim for $50 million,
claiming violation of minimum treatment and expropriation
without compensation. The claim is still pending.
21
Investor-State Disputes:
Metalclad Corp. v. United Mexican States
•
Permits were issued for a Mexican company to
construct a hazardous waste facility … U.S.-based
Metalclad bought the Mexican company.
•
Mexican state and municipality objected to the
facility, arguing that the site was on an important
aquifer, and it never opened.
•
Metalclad filed a NAFTA claim against Mexico for
$90 million, alleging violation of minimum treatment
rules and expropriation without compensation …
NAFTA panel agreed and awarded $16.7 million.
22
Investor-State Disputes:
Methanex Corp. v. U.S
•
Canadian Methanex makes methanol, a key
component of MTBE, a potential carcinogen …
…in 1997, California ordered a phaseout of MTBE.
•
In 1999, Methanex filed a NAFTA claim for $900
million: violation of national treatment rules and
minimum treatment rules (favoring ethanol) and
uncompensated expropriation.
•
“Minimum treatment rules” for investors require
treatment consistent with international law.
23
Investor-State Disputes:
Methanex Corp. v. U.S
•
2005, decision: Methanex failed to prove
discriminatory intent … a non-discriminatory
regulation for a public purpose, enacted with
due process, is not expropriation unless
“specific commitments” are given by the
regulating government … also, one may not
compare different products (MTBE and ethanol).
•
Remaining issues: What kind of “commitment”
could lead to expropriation? What will other
panels do?
24
Investor-State Disputes
•
Thus, plaintiffs in international trade disputes have
attacked legitimate traditional exercises of the
police power for basic environmental protection
purposes, in areas such as:
 product
bans designed to protect the groundwater
from pollutants (Methanex);
 disposal
site requirements designed to protect
aquifers from contamination (Metalclad);
 land
reclamation requirements for open pit mining
(Glamis Gold); and
 bans
on certain extractive industries so as to
preserve important cultural assets (Glamis Gold).
25