Growing-Economy

BY NATHAN NEWMAN

Trade and the States: Promoting Collaboration on Negotiating and Implementing Trade Deals

As we have written in the past, states have increasingly taken action to stop global trade deals from undermining state authority and state regulations that protect consumers, workers and the environment. 

In recent weeks, the debate has heated up over the need to institutionalize the voice of states and protect state authority within trade negotiations.  Just last week the National Conference of State Legislatures (NCSL) passed a resolution asking the White House to commit its trade office to avoiding preemption of state authority.  The House Ways and Means Subcommittee on Trade also recently held a hearing on the issue of strengthening state voices within the trade negotiation process.

The Subcommittee on Trade is still receiving comments on this matter, so Progressive States Network is working with the Forum on Democracy & Trade, Public Citizen's Global Trade Watch and the National Labor Caucus of State Legislators to support a letter to Congress, spearheaded by Rep. Maralyn Chase of Washington state, urging more formal participation by state leaders in the trade negotiations process.  Legislators and organizations can sign onto the letter here:

www.progressivestates.org/tradeletter

This Dispatch will highlight many of the rising concerns by state leaders over recent federal trade deals, how states have been taking action to increase their roles in the trade negotiation process, and recent mobilization by those state leaders working with federal allies to institutionalize the role of states in the trade negotiation and implementation process.

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Recent Concerns by States Over Federal Trade Deals

The letter that PSN and allies like the Forum on Democracy and Trade and Public Citizen's Global Trade Watch are asking state legislators and other allies to sign a letter emphasizes the need to change how trade negotiations are conducted so that the better include state concerns. A number of recent problems highlight this need, including:

• NAFTA Chapter 11 claims brought against California’s regulatory ability to protect public health and the environment:  While the U.S. State Department argued against the claims in the Methanex and Glamis cases, the California Department of Justice received no compensation for the considerable time and expense that they had to devote to defending state laws -- an unfunded mandate by states and something they can ill-afford in the present budget climate.
• The People’s Republic of China sent threatening letters to state legislators in Vermont and Maryland regarding bills introduced in those states dealing with lead content in toys and electronic waste.  China claimed that the bills would violate the World Trade Organization Technical Barriers to Trade agreement.  While states dispute the validity of the claim, they also describe the Department of Commerce notifying China about pending state legislation as inappropriate.
• The WTO case brought by Antigua against the United States on internet gambling:  The WTO found that the U.S. had made a commitment binding gambling under the services agreement.  While the U.S. withdrew its WTO commitment, largely as a result of pressure from states that ban all forms of gambling (Utah and Hawaii) and letters to USTR from 29 attorneys general, the case has led to a messy and still-unresolved dispute with a number of countries regarding the withdrawal of the commitment that could negatively affect businesses throughout the U.S.
• Threatened challenges to California’s Low Carbon Fuel Standard and to greenhouse gas reduction strategies in the 10 Regional Greenhouse Gas Initiative states in the northeast: The federal government of Canada and the Province of Alberta are trying to block the leadership of the states in grappling with these urgent climate change issues by citing WTO and NAFTA rules. 
• Retaliatory tariffs taken by Mexico as a result of a NAFTA Trucking Case are causing severe hardship to many of our agricultural producers and manufacturers.

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States Demanding a Stronger Role in Federal Trade Policy Formation

Various states have established oversight committees to develop expertise on the effect of international trade agreements on state powers and better position states to weigh in during the trade agreement negotiating process to highlight states' interests in pushing for fair trade agreements.  For example the Maine Citizen Trade Policy Commission (CTPC) was created by statute in 2003 and Vermont's Commission on International Trade and State Sovereignty was enabled under this statute. (See also this annual report by Vermont's commission.)

Several states have taken legislative action to ensure meaningful consultation with state legislatures during the trade policy making process. Maryland, Rhode Island, Hawaii, Minnesota, and Maine have enacted legislation which requires legislative approval before a state can be bound to comply with non-trade regulatory restraints in trade agreements (such as procurement, services, and investment provisions) . Similar legislation is pending in California, New Jersey, and New York.

Click on the map, courtesy of the Forum on Democracy and Trade, to see more state actions. 

The 2009 National Conference of State Legislatures Resolution on Trade:  The Obama administration has affirmed a commitment that federal agencies generally refrain from preempting state authority (see the recent White House Executive Order on preemption).  NCSL adopted a general resolution in 2007 on Free Trade and Federalism and last week at their 2009 Legislative Summit NCSL adopted a new resolution (please note, this link leads to the original proposal, not the passed resolution, which was amended in committee) asking the Obama administration to extend its executive order to restrict preemption directly to the Office of the Unites States Trade Representative, which was not covered by the original order.  

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Mobilizing to Institutionalize State Role in Trade Negotiations

On top of the NCSL resolution, recent months have seen strong mobilization by state leaders working with members of Congress to seek a more permanent institutional role for the states in the trade negotiation process.  The Maine Citizen Trade Policy Commission recently sent a letter to US Trade Representative Ron Kirk calling for institutionalization of a state role in negotiating trade deals and Vermont approved an outline of proposals for improving federal-state communication on trade.  The Forum on Democracy and Trade's factsheet, Should States Have a Voice?, includes proposals such as creating a federal-state policy commission funded by the government to coordinate work, allowing states to opt out of parts of trade agreements, helping states in assisting global marketing for local businesses, and better tracking the regulatory effects of trade agreements.

Trade Subcommittee Ways & Means Hearing on USTR's Trade Advisory Committee System:  On July 21 2009,  the Trade Subcommittee of House Ways & Means convened a hearing on the status of the federal Trade Advisory Committee system.  Since membership on current advisory committees is confined to industry and commodity interests, the hearing primarily focused on whether representatives of labor, public health, and environmental organizations should be given seats on the official advisory committees—a proposal which met with furious opposition from business interests.

The hearing focused on problems with some of the advisory committees to the USTR, which include one committee on labor, one on environment, one on agriculture, and crucially for state and local governments, IGPAC—the InterGovernmental Policy Advisory Committee. With members drawn from state legislatures, state courts, plus governors’ and attorney general offices, all state government input into USTR’s trade negotiating agenda comes through IGPAC, yet it receives no technical support from USTR and half of the states have no representation at all with only a few state legislatures directly represented.

The House Ways & Means Trade Subcommittee is accepting testimony on the federal Trade Advisory Committee system until August 4.  As noted above, state legislators led by Representative Maralyn Chase of Washington have put together a sign-on letter calling for an overhaul in the way that USTR deals with states on trade concerns.

Supporting the New TRADE Act:  This summer, over one hundred Congressional Representatives showed that they share state legislators’ concerns about preserving state authority under trade agreements and, led by Rep. Mike Michaud (D-Maine), a former state legislator, introduced the Trade Reform, Accountability, Development and Employment (TRADE) Act (see a summary fact sheet here). This landmark legislation offers a path towards a new globalization policy that can harvest the benefits of trade, without undermining the principles and practice of American democracy, including our systems of federalism and checks and balances. In addition to setting forth in detail what future trade agreements must and must not include, The TRADE Act calls for:

• Improved federal-state consultations on trade;
• Empowerment of states to decide to what extent they will be bound to comply with procurement, service sector, and investment-related non-tariff regulatory constraints in trade agreements;
• Use of a more transparent “positive-list” approach to scheduling during trade agreement negotiations.

To see if your federal delegation supports the TRADE Act, take a look here for sponsors and call Sarah Edelman at Global Trade Watch at 202-454-5193 for more information.

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Conclusion: A New Framework for Promoting Trade

Beyond promoting a better federal-state relationship on negotiating trade agreements, many state legislators and advocates emphasize that there are a number of key tools that can both promote global trade for many small and medium-sized businesses without undermining local regulatory authority.  State development strategies include:

• Export promotion activities;
• Improvements in trade and investment data for imports, exports, and foreign direct investment;
• Integrated strategies of technical assistance on trade and competitiveness;
• The development of comparative metrics that lay out areas of advantage in the global economy.

Even as most public discussion on trade has focused on trade negotiations, key programs supporting global marketing for small and medium-sized businesses have been ignored and geographically-specific data pertaining to services imports and exports, to goods imports, as well as to in-bound foreign investment are lacking, greatly complicating the ability of state trade officials to assist their businesses with strategic marketing advice.  Similarly, better coordination of  the Trade Adjustment Assistance (TAA) program, assisted by recent funding increases included in the federal recovery package, can help move workers displaced by past trade deals into new globally competitive industries.

A new state-federal relationship on trade can take us beyond the sterile debate on whether trade is a good thing to a focus on better strategies for helping local workers and firms benefit and thrive in the global economy.

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