Korea FTA Presents More Economic Hurdles for States

As the nation’s unemployment rate ticks close to ten percent, the Obama administration has announced it will push for early 2011 passage of the largest trade agreement since the North American Free Trade Agreement (NAFTA). The U.S.-Korea Free Trade Agreement (FTA) is modeled on NAFTA, with provisions which undermine the power of governments to enact labor, environmental, and other public interest standards; weaken regulatory authority over the finance sector; and grant investors special rights to sue governments in foreign tribunals. As a result, the U.S. International Trade Commission projected that the Korea FTA will increase the U.S. trade deficit – especially in auto, textiles, iron and electronic equipment sectors.

The economic effects of failed trade policy have been felt acutely in nearly every state. NAFTA-style free trade agreements (FTAs) have led to massive job loss – over 43,000 factories have been shuttered, gutting 5 million manufacturing jobs since the implementation of NAFTA and the World Trade Organization (WTO). And, for Americans fortunate enough to keep their jobs, U.S. wages have barely increased in real terms for decades, even as worker productivity doubled. With the hollowing out of the manufacturing sector, we’ve lost our middle class and a chunk of each state’s tax base.

In order to dig the nation out of our current trade deficit – the largest trade deficit in the world – and our current jobs crisis, we will need smarter trade policy that prioritizes economic stability over new corporate off-shoring privileges.

However, in the midst of the economic crisis, multinational corporations are pushing for more NAFTA-style FTAs with Korea, Panama and Colombia that are filled with the same NAFTA-CAFTA off-shoring incentives. This push continues even as research shows that over the past decade the growth rate of U.S. exports to non-FTA partners has been twice that of U.S. exports to FTA partners.

These FTAs also include the foreign investor privileges that state legislators nationwide have strongly opposed. Under similar NAFTA “Chapter 11” foreign investor rules, state governments have already paid $329 million to foreign investors as a result of lawsuits over environmental, labor, and other public interest laws.  As we covered recently, these “Investor State Enforcement” (ISE) provisions, common to several free trade agreements, grant companies which operate in one of the states that are party to the trade pact the right to sue another party country's government if that country’s federal or state laws and regulations impinge upon the company’s investments there.  See here for the full NAFTA Chapter 11 track record.

Just this summer, state legislators at the 2010 NCSL Legislative Summit reiterated their stance against these extreme foreign investor privileges and for trade reform. The Free Trade and Federalism policy makes clear that state legislators will not tolerate another trade agreement that empowers foreign investors with the right to challenge state laws in foreign tribunals. Unfortunately, under the Korea FTA at least 1,030 corporations with 2,055 establishments across the United States and South Korea would obtain new investor rights to sue state and federal governments in foreign tribunals. (Check out Global Trade Watch’s investor map to see where they are located.)

In the coming weeks, the U.S. Congress will likely vote on the Korea FTA – the first of a slew of NAFTA-style pacts that may be sent to Congress during in 2011. Trade reform advocates are already mobilizing people to call on their Congressional delegation to safeguard their state’s tax base and vote “NO” to more corporate off-shoring privileges. Contact Sarah Edelman at Public Citizen’s Global Trade Watch at to find out how you can get involved – and to find out how many workers in your state lost under NAFTA and are at risk of losing their jobs if the Korea FTA is implemented.

Full Resources from thisArticle

Public Citizen’s Global Trade Watch - Trade Data Center
American Prospect - SPECIAL REPORT: Jobs Well Done: What the Obama Administration Can Do for American Workers Now
Economic Policy Institute - Free Trade Agreement with Korea will cost U.S. jobs
Forum on Democracy and Trade - Plain Language Guide: Global Agreement on Trade and Services Negotiations on Domestic Regulation
Global Development and Environment Institute at Tufts University - Reforming U.S. Investment Treaties
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